The intensively issued electricity reform related documents since 2023 focus on guaranteeing supply and consumption, especially the implementation of relevant decision-making in the construction of the main grid, ultra high pressure, and distribution network in the Action Plan for Accelerating the Construction of a New Power System (2024-2027).
According to Tianfeng's research report, the intensively issued electricity reform related documents since 2023 focus on guaranteeing supply and consumption, especially the implementation of relevant decision-making in the construction of the main grid, ultra high pressure, and distribution network in the Action Plan for Accelerating the Construction of a New Power System (2024-2027). State Grid Corporation's total grid investment in 2024 will exceed 600 billion yuan for the first time (initially planned at 560 billion yuan at the beginning of the year), with an additional 71.1 billion yuan compared to last year. Based on the 600 billion yuan investment in 2024, the year-on-year growth of grid investment this year is estimated to be around 13.7%, marking the first time the growth rate of grid investment has exceeded 10% since 2015, surpassing the growth levels of the past few years (5%-8%).
Tianfeng Securities' main points are as follows:
The power supply and demand are tight, with guaranteeing supply and consumption being the main theme of the electricity reform.
According to the analysis and prediction report on the national power supply and demand situation in the first half of 2024 released by the China Electricity Council, it is estimated that the total electricity consumption in the whole society in 2024 will reach about 9.82 trillion kilowatt-hours, an increase of around 6.5% year-on-year. At the same time, it is predicted that the highest national peak load for electricity dispatch in 2024 will increase by about 0.1 billion kilowatts compared to 2023, reaching around 1.45 billion kilowatts. Despite the growth in both power generation and consumption and maintaining a relatively matched trend in total volume, due to frequent extreme weather, limitations in the absorption capacity of new energy, and the intertwining impacts of various complex factors, the electricity supply this year may be less than the electricity demand. The intensively issued electricity reform related documents since 2023 focus on guaranteeing supply and consumption, especially the implementation of relevant decision-making in the construction of the main grid, ultra high pressure, and distribution network in the Action Plan for Accelerating the Construction of a New Power System (2024-2027).
The acceleration of power grid engineering investment with a focus on ultra high pressure construction as a key area.
Since March 2024, the investment growth rate in power grid construction has accelerated and surpassed the investment growth rate in power generation. From January to July 2024, the investment growth rates in power grid engineering construction and power generation construction were 19.2% and 2.6% respectively, further widening the gap. State Grid Corporation's total grid investment for the whole year will exceed 600 billion yuan for the first time this year (initially planned at 560 billion yuan at the beginning of the year), with an additional 71.1 billion yuan compared to last year. The additional investment this year is mainly used for the construction of ultra high voltage AC/DC projects, strengthening the connection between county-level power grids and large power grids, digital and intelligent upgrades of the power grid, better guaranteeing power supply, promoting the transmission from large wind and solar bases in the western region, enhancing disaster prevention and relief capabilities of the power grid, and improving services for people's livelihood. Based on the 600 billion yuan investment in 2024, the year-on-year growth of grid investment this year is estimated to be around 13.7%, marking the first time the growth rate of grid investment has exceeded 10% since 2015, surpassing the growth levels of the past few years (5%-8%). At the same time, compared to the initial target of 560 billion yuan at the beginning of the year, the total amount has been raised by an additional 40 billion yuan.
It is recommended to focus on Power Construction Corporation of China, Power Construction Corporation of China, China Nuclear Engineering Corporation, fujian yongfu power engineering, and so on in the segmented prosperity track.
(1) In the field of electrical power engineering construction, the combined market share of Power Construction Corporation of China and China Power Construction Corporation exceeds 78%. The market shares of China State Construction Engineering Corporation, China Nuclear Engineering Corporation, and cgn power co.,ltd. are 3.12%, 7.65%, and 5.72% respectively. In addition, Power Construction Corporation of China undertakes over 60% of the conventional island construction of nuclear power units in China. The increasing prosperity of the nuclear power industry is driving the rise in related engineering construction scale. It is advisable to focus on Power Construction Corporation of China, China Power Construction Corporation, and China State Construction Engineering Corporation in the field of electrical power engineering construction; specifically, in the nuclear construction sector, attention should be given to China Nuclear Engineering Corporation (601611.SH), Power Construction Corporation of China (601868.SH), and cgn power co.,ltd. (003816.SZ).
(2) In the field of power grid engineering construction, in addition to large state-owned enterprises such as Power Construction Corporation of China, China Power Construction Corporation, Tbea Co., Ltd. has a market share of 21.1% and is a leading enterprise in the transmission and transformation field. The market shares of Suwenshenneng and jiangsu etern are 6.45% and 6.38% respectively. In the private power grid engineering sector, it is advisable to focus on Tbea Co., Ltd. (600089.SH), Suwenshenneng (300982.SZ), and jiangsu etern (600105.SH).
(3) Since the beginning of 2024, China has approved the commencement of the 'One Trunk and Two Direct' Ultra High Pressure projects, namely the Shaanbei-Anhui ±800 kV UHVDC transmission line project, the Aba-Chengdu East 1000 kV UHVAC project, and the Gansu-Zhejiang ±800 kV UHVDC project. The construction of Ultra High Pressure has entered a peak period.
Power Construction Corporation of China undertakes 90% of China's Ultra High Pressure engineering survey and design tasks, giving it a significant advantage in the Ultra High Pressure construction field. Power Construction Corporation of China has rich experience in Ultra High Pressure construction and was involved in the Zhangbei Flexible DC project, the world's first DC grid project with network characteristics. With its lean technology in transmission and distribution networks, electrical internet technology, and specialized, standardized, and regulated total contracting experience and capabilities in transmission and transformation engineering, fujian yongfu power engineering's business covers all voltage levels from 220V to ±1100kV overhead transmission lines (AC, DC Ultra High Voltage, Extra High Voltage, High Voltage, etc.).
In the Ultra High Pressure sector, it is advisable to focus on Power Construction Corporation of China, Power Construction Corporation of China (601669.SH), fujian yongfu power engineering (300712.SZ), and for transmission line tower construction attention should be on Hongsheng Huayuan (601096.SH).
Risk warning: Risks of worsening electricity supply and demand situation, industry policy risks, and unexpected electricity investment.
