Zhongguang Nuclear Group's new energy sector is the only listed platform and the core body of new energy development and operation in the group. CGN New Energy is a comprehensive energy enterprise based on new energy power generation listed in Hong Kong. By the end of 2020, the company's equity installed capacity was 7.55 million kilowatts, including 4.050 million kilowatts of new energy (wind power 2.96 million kilowatts, accounting for 39 percent, photovoltaic 1.09 million kilowatts, accounting for 14 percent). Zhongguang Nuclear Group, the controlling shareholder of the company, is a leading comprehensive operator of clean energy power generation in China, with a huge volume of new energy business (25 million kilowatts at home and 1100 kilowatts abroad). The company has obtained the right to give priority to the development and acquisition of new energy projects within the group by signing a "non-competition deed" with CGN; and through signing a business cooperation framework agreement with CNNC Wind Power and CGN Solar under the same controlling shareholder, the company has been entrusted with overall responsibility for the operation and management of new energy plate projects within the group, and has become the core body of the group's new energy business operation.

The installed scale of new energy has expanded rapidly, which has become the main source of performance increment, and the traditional energy business is basically stable. The predecessor of the company, Meiya Electric Power, was established in 1995 and began to get involved in coal power, cogeneration and natural gas power generation. In 2010, China General Nuclear Group acquired Meiya Electric Power, renamed China wide Nuclear New Energy and listed H shares in 2014. Due to historical reasons, the company has retained a number of traditional energy business. So far, the company has a total of 3.5 million kilowatts of traditional energy projects, accounting for 46.4% of the company's total installed capacity. The growth of the above-mentioned business scale is very limited, and profits remain stable as a whole. The company officially entered into new energy power generation in 2007, and after CGN acquired the company, it divested some of its traditional energy assets and injected 1.38 million kilowatts of new energy assets into the company in 2015. since then, the company has shifted to new energy in an all-round way. By the end of 2020, the company had installed 4.05 million kilowatts of new energy, accounting for 53.6% of Prida, accounting for 52% of the company's main business profit and 75% of the return net profit. New energy business has become the company's main source of profit, as well as almost all the source of profit growth in the future.

The new energy business has excellent location layout / strong cost control ability, and the company's offshore wind power is expected to become the group's new business card in the future. The company's new energy projects are mainly based on onshore wind power, which will gradually become both beautiful and prosperous in the future. In terms of regional distribution, the company's current new energy installation is mainly located in the three north and central regions, with better location and better cost control ability. In addition, the group also gives the company some low-cost financial lending support, and the company obtains a large number of low-interest unsecured loans by signing a financial cooperation framework agreement with the group, accounting for 29% of the interest liabilities, and the weighted average interest rate of this part of the debt is only 3.36%. Under multiple advantages, the company's kilowatt-hour profit is at a better level in the industry. In 2020, the company's photovoltaic kilowatt-hour profit reached 0.33 yuan / kwh, wind power profit reached 0.22 yuan / kwh. In addition, relying on the resources of the group, the company is gradually increasing its investment in Haifeng. Up to now, the company is responsible for managing the offshore wind power reserve of 23 million kilowatts of offshore wind power (including CGN Wind Power / CGN Solar outside the listed company). At present, the company has a number of projects under construction. Relying on the group's project reserves and large-scale development strength, offshore wind power is expected to become a new growth point of the company.

Backed by Zhongguang Nuclear Group, relying on the group's large-scale development and operational advantages, the company is expected to achieve high rate of return and high growth at the same time. By the end of 2020, the new energy sector in Guangzhou Nuclear Power Corporation has installed 16.723 million kilowatts of wind power holding capacity in 25 provinces across the country, and photovoltaic holding installed capacity of 6.9396 million kilowatts in 29 provinces across the country. At present, there are three platforms in the new energy sector of the Group, namely, the Company, Zhongguang Nuclear Wind Power and Zhongguang Nuclear Solar Energy. Through the "non-competition deed" and the "entrustment Management Agreement", the company is responsible for the priority of the development of new energy projects in the Group and the actual operation and management of CGN's wind power and CGN's solar energy business. Zhongguang Nuclear Group plans to install 30 million kilowatts of new energy during the 14th five-year Plan period, with an average of 6 million kilowatts per year. Relying on the group's huge stock assets and new development plans, the company can give full play to the advantages of scale and the group's ability to acquire projects, while achieving high rate of return and high growth. We expect the company to achieve at least 1 million kilowatts of new energy installed growth each year and ensure that the project rate of return is ahead of its peers.

Profit forecast and rating: relying on the group's domestic new energy business, the company's project resource acquisition ability and cost control ability are better than those of its peers, and it is expected to take into account both growth rate and growth quality. We expect the company's net return profit from 2021 to 2023 to be 13.61,16.84 and 2.032 billion yuan respectively, and earnings per share to be 0.32,0.39 and 0.47 yuan per share, respectively. The current share price is trading at 8.5, 6.9 and 5.7 times earnings, respectively. At present, the price-to-earnings ratio of China Longyuan Power Group Corporation, the leading company of new energy in Hong Kong, is 15.6 times in 2021, and the average price-to-earnings ratio of A-share major new energy listed companies is 22 times in 2021. Taking into account the company's current small size, good growth, and the synergy advantage of the backing group, we believe that the company's current valuation has a significant advantage over the comparable company, covering for the first time and giving a "buy" rating.

Risk hint: there is an adverse change in policy, and the company's new energy installation is not as expected.