Accelerated approval of nuclear power, multi-line layout, building a global clean energy giant company is one of the domestic nuclear power oligarchs. As of the end of 2024Q3, the company controlled 25 nuclear power units in operation, with an installed capacity of 23.75 GW; the company held 18 units approved for construction or to be built, with an installed capacity of 20.64 GW. In 2020, the company acquired CNNC Energy and became the only clean energy power generation operation platform under CNNC. As of the 2024 interim report, the company holds 7.56 GW of wind power installed capacity and 14.81 GW of photovoltaic installed capacity. According to the company's “14th Five-Year Plan” plan, the total installed capacity of new energy sources will reach 30GW. We expect the company's 2024-2026 revenue to be 79.77/87.98/94.63 billion yuan, respectively, net profit to mother of 11.31/12.53/13.11 billion yuan, and EPS of 0.60/0.66/0.69 yuan, corresponding to the current PE price of 15.9/14.4/13.7 times, which is covered for the first time and gives a “buy” rating.

There is considerable room for nuclear power growth in the medium term. After capital expenditure is over, the dividend ratio is expected to gradually see Changjiang Electric Power's high approval for three consecutive years to open up room for growth in the nuclear power industry for the next 5-10 years. In 2021, the world's first batch of “Hualong 1” was put into commercial operation, and 10/10/11 nuclear power units were approved respectively in 2024, including 18 units using “Hualong 1” technology. The company's average dividend payment rate for the past three years is about 35%, and the dividend payment rate at the end of the capital expenditure cycle is expected to match that of Changjiang Electric Power. The company's dividend in 2023 was 0.195 yuan per share, and the dividend payment ratio was 34.7%. Changjiang Electric Power promised a dividend ratio of not less than 70% during the “14th Five-Year Plan” period.

The nuclear power business model is similar to hydropower, and the capital expenditure during the construction period is high; when the company's capital expenditure cycle is over, operating cash flow is abundant and higher than net profit, and the dividend ratio is expected to gradually match that of Yangtze River Electric Power.

When depreciation expires and construction loans are repaid, a large amount of profit margin will be released. The depreciation period of the company's power plants is far lower than the actual period of use. The average depreciation period for the company's nuclear power fixed assets is 25-30 years, while the design life span of second-generation and third-generation nuclear power plants is 40/60 years, respectively, and there are life extension expectations. The actual operating time of nuclear power far exceeds the reduction period of attenuated costs. Depreciation and financial expenses account for significant profit margins. Dismantling the company's electricity business revenue in 2023. Depreciation and financial expenses accounted for 32% of the electricity business revenue, and the profit margin before tax was 31%. For units currently in operation, there is plenty of room for listed companies to release profits after depreciation expires and construction loans are repaid. At that time, the company's profit margin before tax is expected to exceed 50%.

Risk warning: Nuclear power unit approval progress falls short of expectations; risk of market-based electricity price fluctuations; risk of fluctuations in raw material prices; risk of nuclear power unit operation.