台海核电(002366)跟踪报告:拓展海上核电新应用 材料优势驱动新产品延伸

Taiwan Strait Nuclear Power (002366) follow-up report: expanding offshore nuclear power new Applied Materials Inc advantage-driven new product extension

中信證券 ·  05/09/2018  · Researches

Main points of investment

Explore new business in the application of nuclear energy and develop new products of nuclear power equipment. Our follow-up report on Nuclear Power across the Taiwan Strait (002366) in June 2017: material advantages, multiple drivers, creating a New era of Great Power

It is pointed out that the company's growth model is "based on the advantages of alloy materials, sustainable development from the three dimensions of market, business and products, and finally grow into a multi-layout high-end equipment manufacturer." The development of the company in the past year still follows this growth model. The company has been suspended from trading since December 6, 2017 for major asset restructuring and will resume trading on May 7, 2018. During this period, the company successfully opened up new business of offshore nuclear power plant equipment and expanded new products such as pressure vessels. The purpose of this report is to introduce new changes in the fundamentals of the company.

New business of nuclear energy application: the curtain of offshore nuclear power plant is up, and the equipment provider is the first. (1) Business extension:

Participate in the first offshore nuclear power plant project in China. In January 2018, China Nuclear Corporation, Taiwan Strait Group and Yantai Lantian Investment signed a comprehensive offshore clean energy supply platform project. The offshore nuclear power plant is a miniature version of the onshore nuclear power plant installed on the ship to become a mobile water, electricity and heat supply station. (2) Industry prospect: an ideal comprehensive clean energy supply platform with hundreds of billions of industry space. Offshore nuclear power plants have comparative advantages in economy and are very attractive to cost-sensitive enterprises. We believe that cooperation with coastal industrial parks is expected to become the first mode for offshore nuclear power plants to land in China. In the long term, China's coastal industrial parks are expected to pull hundreds of billions of offshore nuclear power plant market. In addition, oil and gas production platforms and islands and reefs are also important potential customers. (3) the company benefits: it is expected to become the core equipment supplier of offshore nuclear power plants. According to preliminary estimates, an offshore nuclear power plant corresponds to 1 billion orders for nuclear power equipment.

The project is a combination of industrial giants, local governments and local leaders, and Taiwan Strait Nuclear Power is expected to receive 1 billion orders.

New products of nuclear power equipment: expand pressure vessels and other new products + enter the post-market. (1) Product extension: full layout from main pipeline to nuclear island main equipment, from front-end construction to back-end processing. The 2017 annual report reveals that the products have been extended to pressure vessels, pressure regulators, evaporators and so on. We predict that the total value of new products is 300-400 million per unit. At the same time, the company has entered the post-nuclear power market to provide steam reforming equipment for the related parties in the Taiwan Strait. (2) Industry prospect: AP1000 units are approved to be loaded, and the nuclear power equipment industry is facing marginal changes. Sanmen No.1, the world's first AP1000 unit, received charging permission at the end of April. If it can generate electricity smoothly, we expect subsequent AP1000 and CAP1400 units to be approved, and the nuclear power equipment industry is expected to usher in marginal changes. (3) the company benefits: expand during the trough of the industry, waiting for the outbreak to come.

The company has expanded the market share of nuclear power equipment during the trough of the industry. At the same time, 17Q4, the company announced that it intends to raise no more than 3.95 billion yuan to continue to increase the production capacity of nuclear power equipment and special equipment.

Risk factors: the extension progress of new business such as offshore nuclear power plants is lower than expected; the extension progress of new products such as pressure vessels is lower than expected; and the progress of non-public offerings is lower than expected.

Profit forecast, valuation and investment rating. We reiterate that the company's growth model is "based on the advantages of alloy materials, sustainable development from the three dimensions of product extension, business extension and market development, and eventually grow into a multi-layout high-end equipment manufacturer". We believe that the company will continue to follow this model in 2018. Combined with the recent marginal improvement in the fundamentals of the nuclear power equipment industry, the company's business is expected to reach a new level. To maintain the company's annual net profit forecast of 14.1 PE 2.32 billion yuan in 2018-19-20, the corresponding CAGR is 1.36 yuan 1.82 Universe 2.23 yuan (assuming the number of additional shares is 20% of the original share capital), the corresponding PE is 20-15-12 times, and it is expected that the 3-year CAGR will exceed 30%. Maintain the target price of 47.7 yuan, corresponding to 2018 35 times PE, maintain the "buy" rating.

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