Investment advice
In the national energy work conference in 2022, it was mentioned that “under the premise of ensuring safety, orderly promote the approval and construction of nuclear power projects with reliable conditions”. Since 2021, five new units have been approved nationwide; The growth rate of fixed asset investment in nuclear power in the first nine months of this year was 51.5%, reaching a new high in recent ten years. We expect that during the 14th Five Year Plan period, China will approve 6-8 new nuclear power units every year, with a total start-up of about 40gw. With the increase of the number of newly started units, the cost of a single nuclear power unit is about 20 billion yuan according to the investment cost of 16000 yuan / kW of the third generation unit. We expect that the nuclear power construction will usher in a new round of high-speed development period of investment, and the annual investment in nuclear power will exceed 100 billion yuan in the middle and late period of the 14th five year plan. The acceleration of nuclear power construction is beneficial to the whole industrial chain, and equipment manufacturers and operators welcome long-term benefits. At present, the localization rate of the third generation units has reached 85%. We are optimistic about nuclear power equipment suppliers with high gross profit and good competition pattern; It is optimistic that with the increase of units in operation, the commercial performance of equipment with strong consumable properties will continue to grow. Due to high technical and qualification barriers, operators will fully benefit from the continuous expansion of market space.
Industry perspective
Nuclear power is an efficient and economic solution to the problem of power shortage in coastal areas. Most of China’s coastal provinces have a power gap of more than 20%. As a local power source, nuclear power can effectively solve the problem of insufficient power generation in coastal areas. The following advantages of nuclear power will also promote its sustainable development in the process of China’s energy transformation. 1) low carbon emission: nuclear power has no direct carbon emission, and the indirect CO2 emission per kWh is 21g, which is only 1.6% of that of coal power, Cecep Solar Energy Co.Ltd(000591) 7.5% of that of power generation, and 8.9% of that of hydropower; 3) The utilization hours of nuclear power are much higher than those of other power sources: due to the characteristics of high utilization rate and not participating in peak shaving, the utilization hours of nuclear power are much higher than those of other power sources. In 2020, the average annual utilization hours of nuclear power equipment will reach 7453h, 76.8% higher than that of thermal power (4216h).
The spent fuel treatment capacity is insufficient, and the post-treatment construction is expected to accelerate. In terms of physical characteristics, a million KW PWR nuclear power plant discharges about 25 tons of spent fuel every year, including about 23.75 tons of recyclable uranium. As of September 2021, the number of nuclear power units in operation in China is 52, which is gradually increasing. China has not yet formed the reprocessing industrial capacity. It is expected that the annual reprocessing capacity gap will exceed 1250 tons, and the construction of spent fuel reprocessing capacity needs to be accelerated. We expect that by the end of 2021, the cumulative measurement of off pile storage is expected to exceed 10000 tons. Spent fuel treatment has restricted the development of China National Nuclear Power Co.Ltd(601985) industry to a certain extent. We expect that during the 14th Five Year Plan period, with the increase of new units, the post-treatment link will develop rapidly. It is suggested to pay attention to the equipment manufacturers who layout the spent fuel treatment business.
It is estimated that during the 14th Five Year Plan period, the CAGR of nuclear power operation market will exceed 7%. The proposal of the “double carbon” goal, strong power demand, tight supply and optimization of energy transformation will drive the increase of China National Nuclear Power Co.Ltd(601985) supply proportion and bring about the continuous expansion of the scale of the operating market. According to the forecast data of China electricity Union, China National Nuclear Power Co.Ltd(601985) power generation will increase from 366.2 billion kwh in 2020 to 518.9 billion kwh in 2025. According to the benchmark price of 0.43 yuan / kWh for nuclear power on grid, the scale of China National Nuclear Power Co.Ltd(601985) operation market will reach 223.1 billion yuan in 2025, with a compound growth rate of 7.2% in the next five years.
Recommended target: equipment manufacturer – Dongfang Electric Corporation Limited(600875) , Jiangsu Shentong Valve Co.Ltd(002438) , Harbin Electric Corporation Jiamusi Electric Machine Co.Ltd(000922) ; Operators – China National Nuclear Power Co.Ltd(601985) , Cgn Power Co.Ltd(003816) .
Risk statement
Risk of policy failure to meet expectations; The progress of new construction and approval of nuclear power is less than expected; Nuclear power safety accidents led to construction stagnation.
