Fujian Investment Group's new energy platform currently has an installed capacity of 1 GW. The company is a new energy operator under the Fujian Development Group. As of the end of June 2023, it had a holding installed capacity of 0.9573 million kilowatts, including an installed capacity of 0.6113 million kilowatts of onshore wind power, 0.296 million kilowatts of offshore wind power, 0.02 million kilowatts of photovoltaic power generation projects, and 0.03 million kilowatts of installed capacity of biomass power generation projects.

In order to avoid competition in the industry, the Group promised to inject sea breezes and savings programs. In order to avoid competition in the industry, the Group promised to take the opportunity to inject its remaining power companies into listed companies. In 2019, the Group carried out its promise to inject a total of 0.298 million kilowatts of offshore wind projects for the first and second phase of the Putian Pinghai Offshore Wind Farm owned by Zhongmin Haidian, helping to increase the company's installed capacity and profits dramatically. Since some projects have not yet been put into operation, in 2019, the Group once again promised that “any entity in Fujian Investment Offshore Power, Fujian Investment Power, Fujian Investment Pumped Energy Storage, Ningde Fujian Investment, or Xiapu East Fujian will be put into operation, achieve profit within a full fiscal year, have no compliance issues, and start the asset injection process within one year after meeting the listing conditions” (see text for details). These power companies have 1.21 million kilowatts of ocean wind indicators (of which 0.31 million kilowatts have been put into operation, 0.3 million kilowatts have been approved and not put into operation), pumped water storage The target of 1.2 million kilowatts (already in production) guarantees the certainty that the company's installed capacity and profits will continue to grow in the next few years.

The marine wind resources in Fujian Province are of high quality, and the yield of offshore wind power stocks is extremely high. Fujian Province is blessed with wind power resources. Under the narrow tube effect, wind speed increases along the coast and islands of Fujian, and the duration of wind speed can be extended, and wind resources are extremely rich. According to data from the National Energy Administration, the average wind speed in Fujian Province is 7.1-10.2 m/s, and the number of hours of equivalent utilization per year is between 2400-3800, ranking first in the country. Affected by this, the ROE of offshore wind power projects put into operation in Fujian Province in 2021 and before remained above 20%, far higher than sea wind projects in other provinces.

In the future, the Fujian Sea Wind approval method is expected to be more reasonable, and it is expected that high returns will be obtained when wind resources are high quality and costs are reduced. From the perspective of yield, in the past, the bid price for the Fujian Sea Wind project was the main one, and the winning electricity price dropped to around 0.2 yuan/kilowatt-hour, causing the profitability of the Seabreeze project to be lower. It is expected that in the future, the approval method for Fujian Province will be more reasonable. Against the backdrop of falling costs and the number one wind resource in the country, the yield of new projects in Fujian Province is expected to increase dramatically in the future. Currently, the winning bid price for offshore fans (including towers) has dropped to 3,680 yuan/kW, which is almost lower than the highest price in 2021. If the Internet can be accessed at an affordable price, the operating profit of the sea breeze project is extremely impressive. We estimate the IRR capital of more than 15%.

The existing Sea Breeze Reserve (plus the Group's commitment to inject the project) is about 1 GW to guarantee a high increase in the company's installed capacity and profit certainty. In 2023, the Group added 0.3 million kilowatts of sea wind (Changle Offshore Zone I project). In addition to the aforementioned Fujian Investment Offshore Power Company, the Putian Pinghai Bay Phase III and Xiapu Area B projects owned by the Group in 2019, the company will add about 1 GW of sea breeze in the future, doubling the company's current scale. These projects are highly certain and are expected to be put into operation (or injection) one after another in the next few years. Looking forward to the future, in the context of the acceleration of Haifeng approval in Fujian Province, the company is expected to continue to obtain new projects to ensure continued profit growth.

Profit forecast and rating: Without considering asset injection, we expect the company to achieve operating income of 1.653, 1.738, and 1.828 billion yuan in 2023-2025, with year-on-year growth rates of -7.7%, 5.13%, and 5.19% respectively, and realized net profit of 0.607, 0.693, and 0.704 billion yuan, respectively, with year-on-year growth rates of -16.8%, 14.2%, and 1.65%, respectively. The PE corresponding to the current stock price is 14, 12, and 12 times, respectively. We selected Three Gorges Energy, Jiangsu Xinneng, and Zhejiang Xinneng as comparable companies for valuation. The company's valuation level was lower than that of comparable companies, and for the first time, it was covered and given an “gain” rating.

Risk warning: 1) Haifeng project approval and commencement progress falls short of expectations; 2) Asset injection falls short of expectations; 3) Putian Pinghai Bay Phase III project subsidy verification is risky