Core viewpoints

The company issued a 2023 restricted stock incentive plan (draft), which intends to grant 2.31 million restricted shares to 45, including Mr. Wang Yong, the actual controller of the company. Equity incentives are bound to the interests of employees on the ground, and the goal of performance evaluation shows the confidence in the development of the company. Recently, the notice on further speeding up the Construction of Electric Power spot Market jointly issued by the National Development and Reform Commission and the Energy Bureau mentioned that the time node plan and plan of establishing capacity compensation mechanism should be clearly established as soon as possible. to explore the reasonable compensation for the value of reliable power capacity, the capacity price marks the historical transformation of the role of coal power from "electricity main body" to "guarantee supply + peak shaving", and the company has benefited from it in an all-round way. As a coal power auxiliary equipment manufacturer, the company has benefited obviously, and the newly signed orders are growing rapidly. Thermal power flexible transformation of the general trend, the company recently won the bid for a number of full-load denitrification projects, growth is expected. The company's new layout of steel slag treatment and photovoltaic hydrogen production project landed, the market space is broad.

Brief comment

Equity incentives are bound to the interests of employees on the ground, and the goal of performance evaluation shows the confidence in the development of the company. The company issued the 2023 restricted stock incentive plan (draft) after October 31, which intends to grant 2.31 million restricted shares to the incentive targets, accounting for about 1.88% of the company's total share capital of 123.071 million shares at the time of the announcement of this draft incentive plan. the award price is 9.70 yuan per share, and the total number of incentive targets is 45 people, including Mr. Wang Yong, the actual controller of the company, and Mr. Liu Yanhui and Mr. Zhang Lianhai, who acted in concert. The performance evaluation target is that the 25-year revenue of 24amp will reach 13 / 1.65 billion yuan respectively, and the growth rate of the 24-year target is 71% higher than that of 22 years. In the context of accelerated investment in coal power, the company as a coal power auxiliary equipment subdivision leader, a significant increase in demand, rapid growth of orders, the incentive target is full of strength.

The electricity price of capacity is about to come out, and the company benefits in an all-round way. Recently, the General Office of the National Development and Reform Commission and the Comprehensive Department of the National Energy Administration jointly issued the Circular on further speeding up the Construction of Electric Power spot Market, referring to exploring the establishment of a capacity compensation mechanism. To promote the calculation and calculation of the cost recovery of all kinds of reliable power supplies, areas with low annual average utilization hours of reliable power sources such as coal power can clearly establish the time node plan and scheme of the capacity compensation mechanism as soon as possible, and explore the reasonable compensation for realizing the capacity value of reliable power sources. The capacity electricity price marks the historical transformation of the role of coal power from "electricity mainstay" to "guarantee supply + peak regulation", which will effectively help coal power units stabilize profit level, recover fixed costs and reduce load to assume the role of peak shaving. it is a great benefit to the new coal power investment and flexible transformation, and the company benefits from it in an all-round way.

The flexibility transformation of thermal power plant is the general trend, and the company's orders are expected to increase frequently. On October 25, the National Development and Reform Commission and the National Energy Administration issued the guidance on strengthening the Stability of Power system under the New situation. It is mentioned that the conventional power regulation and support capacity should be enhanced, all the new coal-fired power units should be manufactured flexibly, and the flexibility transformation of the units in service should be changed. With the continuous growth of new energy installation and the prominent consumption pressure, thermal power flexibility has been transformed into the lowest cost peak regulation mode, which is expected to become the main force of new energy peak shaving. The company's full-load denitrification system is a necessary link for thermal power flexibility transformation, and the company has a high market share. According to the data of public bidding, the company has recently won the bid for several flexible projects such as the compound hot water recycling transformation of economizer of # 1 and 2 units in Jiaozuo Power Plant of Henan Company, which is expected to grow continuously.

Steel slag treatment and photovoltaic hydrogen production projects have been launched, with broad market space. The steel slag rolling crushing and waste heat recovery technology independently developed by the company has a wide application range and can handle various molten steel slag and high temperature solid steel slag. In June, the company won the bid for 104 million yuan steel slag industrialization comprehensive utilization equipment project, marking that the company officially entered the field of steel slag treatment. In addition, the company independently developed "waste gas slag quenching steel slag in-situ carbon fixation and quality improvement technology", which is expected to be applied in batches in the future. The company launched the photovoltaic hydrogen production project in September, which is expected to bring significant increment to the company's 24-year performance, and officially announce that the company has entered the hydrogen energy field, with promising prospects.

Profit forecast: It is estimated that the net profit of the company from 2023 to 2025 will be RMB 105 million, RMB 191 million and RMB 265 million respectively, maintaining the "buy" rating.

Risk hint: coal power investment is not as expected, raw material prices fluctuate, coal power investment is not as expected as expected: under the urgent demand of supply protection and peak regulation, coal power investment has returned to growth since 2021, and has accelerated significantly since August 2022, but if coal power enterprises fail to invest as expected due to operational difficulties, or the bidding rhythm is not as expected. The company may face the risk that the order growth of related products is less than expected.

Raw material price fluctuation: at present, the company's main products are boiler energy-saving and environmental protection equipment, and its main raw materials are steel, mechanical and electrical equipment materials, accounting for more than 60% of the company's operating cost. therefore, the market price of raw materials will have a great impact on the profitability of the company. The progress of flexibility transformation of thermal power plant is not as expected: the flexibility transformation of thermal power plant has become one of the key measures to improve the consumption capacity under the background of new energy development, but flexibility transformation will incur investment costs and increase operating costs for coal power enterprises. It needs to be compensated through the auxiliary service market. If the auxiliary service market system and corresponding subsidies do not meet expectations, it may affect the enthusiasm of coal power enterprises to carry out flexible transformation.