China Three Gorges Renewables (Group) Co.Ltd(600905) (600905)
The company is the main body implementing the new energy strategy of the Three Gorges group, and its performance continues to improve
The company is the main body implementing the new energy business strategy of the Three Gorges group. Focusing on the strategic objectives of “scenery Three Gorges” and “offshore wind power leader”, the company actively develops onshore wind power and photovoltaic power generation, vigorously develops offshore wind power, and steadily develops small and medium-sized hydropower business. In recent years, the installed capacity of the company has increased rapidly. By the end of June 2021, the total installed capacity put into operation has reached 16.437 million KW. In 2020, the company achieved a revenue of 11.315 billion yuan, a year-on-year increase of 26.33%; The net profit attributable to the parent company was 3.611 billion yuan, a year-on-year increase of 27.16%.
Industry: stock subsidies accelerated clearing + parity came, and profits and cash flow gradually improved
Under the background of “carbon peaking” and “carbon neutralization”, we predict that the cumulative installed capacity CAGR of wind power and photovoltaic will be 9% and 15% respectively from 2020 to 2030; 6% and 9% in 2020-2050. Looking forward to the future, the issuance of stock subsidies driven by policies is expected to speed up, the era of superposition parity is coming, new energy operators are expected to gradually get rid of their dependence on subsidies, and the cash flow, profitability and growth of the industry are expected to be significantly improved.
Highlights: the installed capacity ranks at the forefront of the industry, with strong support from actual controllers
① The Three Gorges group has strong comprehensive strength and strong support for the company. The actual controller, the Three Gorges group, takes new energy as the second main business and takes offshore wind power as the strategic core. According to the objectives of the group’s 14th five year plan, the Three Gorges group’s new energy installed capacity will achieve the goal of 70-80 million kW in the next five years, which is equivalent to 4-5 times on the existing basis. As the main body implementing the new energy business strategy of the Three Gorges group, the company’s installed capacity is expected to accelerate growth. The group has sufficient project reserves and strong fund coordination ability, and continuously promotes industrial chain coordination to provide strong support to the company.
② Scenery and regional balanced development, with obvious first mover advantages. The company has relatively balanced wind power and photovoltaic installed capacity, accumulated rich experience and resources in project acquisition and project operation, and has significant advantages in the construction of “integration of scenery, water and fire storage” in the future; The company unswervingly implements the strategy of “leading offshore wind power” and focuses on the continuous large-scale development of offshore wind power. It has become one of the most powerful offshore wind power developers in China; The company has a national layout, the resources in the project area are of high quality, and the utilization hours are higher than the national level.
③ The installed capacity ranks in the forefront of the industry and the cost control ability is outstanding. The company’s wind power, photovoltaic installed capacity and power generation capacity are at the forefront of the industry. By the end of 2020, the market share of wind and photovoltaic installed capacity reached 3.16/2.57% respectively. The company pays attention to cost management, strictly controls costs in capital, construction, operation and maintenance, and promotes the continuous improvement of benefits.
Profit forecast and Valuation: the company is the leader in Shanxi Guoxin Energy Corporation Limited(600617) operation and backed by the Three Gorges group, which is expected to obtain sufficient resource support. It is estimated that the revenue will reach 16.8/25/31.1 billion yuan in 21-23 years, a year-on-year increase of 49% / 48% / 24%; The net profit attributable to the parent company was RMB 5.78/10.1 billion, a year-on-year increase of 57% / 48% / 20%. It is estimated that the compound growth rate of the company’s net profit attributable to the parent company in 21-23 years will be 34%, giving peg target 1 in 2022, that is, 34 times the target PE valuation, and the corresponding target price will be 9.89 yuan. It will be covered for the first time and given a “buy” rating
Risk warning: policy promotion is not as expected; The pace of subsidy payment has slowed down significantly; Industrial technological progress slows down; Industry competition intensifies; The risk that the company’s development projects do not meet the expectations, etc
