According to the Futu Securities research report, the State Grid Energy Research Institute predicts in the "China Power Supply and Demand Analysis Report 2024" that the newly installed wind power capacity will reach 90GW for the whole year, with a year-on-year growth of 16.5%; the newly installed solar power capacity will further increase on the high base of 2023, reaching 240GW with a year-on-year growth of 8.8%, breaking through 200GW for two consecutive years. In July, the growth rate of hydropower generation declined, and the decline in thermal power generation narrowed. Considering the change from dry to wet seasons since August last year, it is expected that the growth rate of hydropower generation in the second half of the year will enter a downward channel, the squeezing effect on thermal power generation will weaken, and the growth rate of thermal power generation is expected to continue to rise.

China Galaxy Securities' main points are as follows:

In July, both wind and solar installations achieved high growth, and are expected to reach a new high for the whole year.

In July, the newly installed wind power and solar power capacities were 4.07GW and 21.05GW, with year-on-year growth rates of 22.6% and 12.3%, respectively. By the end of July, the cumulative installed capacities of wind power and solar power reached 1206GW, with a year-on-year growth of 36.5%, accounting for 38.9% of the cumulative installed capacity nationwide during the same period. The State Grid Energy Research Institute predicts in the "China Power Supply and Demand Analysis Report 2024" that the newly installed wind power capacity will reach 90GW for the whole year, with a year-on-year growth of 16.5%; the newly installed solar power capacity will further increase on the high base of 2023, reaching 240GW with a year-on-year growth of 8.8%, breaking through 200GW for two consecutive years. After exceeding fossil energy in historical terms in 2023, the proportion of renewable energy in China will continue to rise, and the installed capacity structure will continue to optimize.

In July, the growth rate of hydropower generation declined, and the decline in thermal power generation narrowed.

In July, the electricity generated by large-scale industrial thermal power, hydropower, nuclear power, wind power, and solar power respectively decreased by 4.9%, increased by 36.2%, increased by 4.3%, increased by 0.9%, and increased by 16.4%. The growth rate of thermal power generation narrowed by 2.5 percentage points from June, and the growth rate of hydropower declined by 8.3 percentage points from June. Considering the change from dry to wet seasons since August last year, it is expected that the growth rate of hydropower generation in the second half of the year will enter a downward channel, the squeezing effect on thermal power generation will weaken, and the growth rate of thermal power generation is expected to continue to rise.

Since the restart of nuclear power approval in 2019, there has been some acceleration, with the number of single approvals in August 2024 exceeding expectations.

After the Fukushima nuclear leakage in Japan in 2011, the domestic nuclear power approval speed slowed down and even paused. In 2019, nuclear power approval resumed, with 4, 4, 5, 10, and 10 new approved nuclear units each year from 2019 to 2023. On August 19, 2024, the State Council executive meeting approved five nuclear power projects including the first phase of the Xuwei project in Jiangsu, including CGN Lufeng #1, #2 units, single machine capacity 1245MW; CGN Zhaoyuan #1, #2 units single machine capacity 1214MW; CGN Cangnan #3, #4 units, single machine capacity 1215MW; CNNC Xuwei 2 "Hualong One" pressurized water reactor nuclear power generator set (single machine capacity 1208MW) and 1 set of high-temperature gas-cooled reactor nuclear power generator set (installed capacity 660MW); State Nuclear Power Guangxi Bailong #1, #2 units, single machine capacity 1250MW: a total of 11 units, installed capacity 12.9GW, with a single approval quantity exceeding the annual level of 2022/2023, exceeding market expectations.

Fourth-generation nuclear power technology has taken another step, paying attention to the positive driving force of technological succession for the industry.

From the perspective of the evolution of nuclear power plant technology, it can be mainly divided into four generations of technology. At present, the third-generation reactor is the mainstream under construction in China. On December 6, 2023, the demonstration project of the Huaneng Shidao Bay high-temperature gas-cooled reactor nuclear power plant was put into commercial operation, marking that China's fourth-generation nuclear power technology has reached a world-leading level. The approved China National Nuclear Power Xuwei high-temperature gas-cooled reactor nuclear power generator set is another breakthrough for China in fourth-generation nuclear power technology.

In addition, there are reserve projects in Shandong Haiyang Xin'an Project, Donghua Maoming Project and other domestic projects. In the future, high-temperature gas-cooled reactor projects are expected to accelerate the landing. Compared with the third-generation technology, the fourth-generation technology has many advantages, including improved power plant utilization, reduced investment cost per unit capacity, shortened construction period, and significantly reduced frequency of serious accident radioactive material releases. The economic benefits and safety improvements brought about by technological upgrades are expected to form a positive driving force for the long-term development of the nuclear power industry.

Investment strategy: Bullish on the thermal power sector with policy catalysis, continuous performance improvement, and valuation space; Long-term bullish on the hydropower and nuclear power sectors with high performance certainty and strong dividend capabilities. New energy is already in the bottom area. Stocks to watch include Huaneng Power International, Inc. (600011.SH), Anhui Wenergy (000543.SZ), Sichuan Chuantou Energy (600674.SH), China Yangtze Power (600900.SH), China National Nuclear Power (601985.SH), etc.

Risk warning: Risks of lower-than-expected installed capacity; Risks of substantial increase in coal prices; Risks of reduction in on-grid electricity prices; Risks of intensified industry competition.