Core views
On August 19, the National Standing Committee decided to approve five nuclear power projects, with a total of 11 units, with a total installed capacity of 12.924 million kilowatts. In recent years, China's nuclear power construction has continued to accelerate. The number of units approved in 22/23/24 was 10/10/11, respectively, and 37 units are under construction. We believe that the number of units approved this time exceeds the total for the whole of last year. According to estimates, it is expected to provide 96.9 billion nuclear power project orders. The company has a clear advantage in the field of nuclear power construction and is expected to fully benefit. From January to July, thanks to the acceleration of nuclear power construction and business transformation and upgrading, the company signed new contracts to achieve high growth of 21.9%.
occurrences
On August 19, the executive meeting of the State Council decided to approve five nuclear power projects, including CNNC Jiangsu Xuwei Phase I Project, CGN Guangdong Lufeng Phase I Project, Shandong Zhaoyuan Phase I Project, Zhejiang San'ao Phase II Project, and China Power Investment Guangxi Bailong Phase I Project, for a total of 11 units.
Brief review
Eleven nuclear power units were approved at a time, freeing up nearly 100 billion dollars in space for nuclear power construction. At this session, the National Assembly decided to approve five nuclear power projects, with a total of 11 units, with a total installed capacity of 12.924 million kilowatts. Nuclear power approvals have continued to accelerate in recent years. The number of units approved in a single round has reached a record high of nearly 10 years. Judging from the amount of nuclear power investment, the investment in the first half of 2024 reached 40.7 billion yuan, an increase of 13.5% over the previous year. After including this newly approved unit, a total of 37 units are under construction at the same time, reaching a historical peak. Based on the average investment of 0.015 million yuan per kilowatt of third-generation units, and the nuclear island+conventional island+BOP project accounting for 50% of the total investment, we approved the release of 96.9 billion nuclear power construction orders, 2.5 times the company's 2023 nuclear power construction order.
Multiple models and multiple generations of units were approved at the same time. The 11 units approved this time have a “4+4+2+1” structure; Guangdong Lufeng Phase I and Guangxi Bailong Phase I have 4 CAP1000 units; the Jiangsu Xuwei Nuclear Power Plant combines third-generation pressurized water reactors with fourth-generation high-temperature air-cooled reactors, mainly industrial heating, taking into account power supply, and consists of two Hualong 1 units and a 660MW fourth-generation high-temperature air-cooled reactor; the remaining Shandong Zhaoyuan and Zhejiang San'ao projects are 4 Hualong 1 units. According to the opinion of speeding up the overall green transformation of economic and social development, China will vigorously develop non-fossil energy and actively develop nuclear power in a safe and orderly manner. By 2030, the share of non-fossil energy consumption will increase to about 25%. Multiple models and multi-generation units approved for nuclear power have been approved at the same time, and the characteristics of new quality productivity are obvious.
The amount of newly signed contracts bucked the trend and grew rapidly. Since 2024, the amount of new contracts signed by the company has bucked the trend. From January to July, the total number of new contracts signed was 85.58 billion yuan, an increase of 21.9% over the previous year, and achieved operating income of 59.56 billion yuan, a decrease of 2.2% over the previous year. The company has benefited from market, experience and technical advantages in nuclear power construction. In the context of accelerated investment in nuclear power, the company is well supported by new signings. At the same time, it is actively transforming into fields such as new energy and petrochemicals. The growth rate of new signings in June/July was over 68%.
Keep profit forecasts and buy ratings unchanged. We believe that the company's nuclear power engineering business will fully benefit from the acceleration of nuclear power investment and construction, active transformation in the industrial and civil engineering sector, and the new signings will continue to grow against the trend. We predict that the company's EPS for 2024-2026 will be 0.78/0.89/1.02 yuan, keep the profit forecast and purchase rating unchanged, and maintain the target price of 9.40 yuan.
Risk analysis
Nuclear power projects fall short of expectations: Nuclear power projects have large investment volumes, long construction cycles, and the need to consider the effects of multiple factors such as nuclear safety and back-end spent fuel treatment, which may cause nuclear power projects to fall short of expectations, making capital turnover difficult.
Risk of continued growth in debt size: The company's balance ratio continues to be high and slightly upward, and the debt size continues to expand. If the company's repayments fall short of expectations and liquidity is tight, there may be some pressure to repay debts.
PPP investment and operation risk: The company's PPP project investment scale is large and the repayment cycle is long. If real estate falls and adjusts beyond expectations, it may further affect local revenue, causing delays in repayment of the company's PPP projects and falling short of expectations.