DC technology is an important supporting technology for building a new physical structure and operation mechanism of power grid. Highly controllable power electronic DC equipment has good application prospects, broad market space and high manufacturing barriers. We believe that there are significant investment opportunities for DC equipment manufacturing in the medium and long term:
Rich application scenarios of DC equipment
Large capacity long-distance point-to-point power transmission, 0.4-500kv AC power grid interconnection, DC networking, DC distribution and offshore wind power transmission are all applications of DC equipment technology. They can not only help the huge stock AC power grid operate more safely and stably, but also play the role of flexible access at both ends of the source load. They are also the basic technology to realize multi-level power market.
Huge market space for DC equipment
By the end of 2021, the DC transmission capacity will total 250 million KW, while the AC transformation capacity of 35kV and above has reached 7.6 billion KVA by the end of 2020, which is far from the “AC / DC hybrid power grid”. We calculate that during the “two five years”, the newly installed DC capacity will reach about 1.4 billion kw, generating about 85.7 billion power module market and 252.6 billion converter valve market, leveraging the infrastructure investment scale of DC stations to reach 1163.2 billion yuan.
Excellent competition pattern of DC core equipment
DC core equipment includes converter valve, DC transformer and DC circuit breaker. In the world, only Hitachi, abb, Siemens and Ge have the construction capacity of three standby DC systems. Only five companies in China have the manufacturing capacity of HVDC equipment, including Nari Technology Co.Ltd(600406) , Xj Electric Co.Ltd(000400) , China Xd Electric Co.Ltd(601179) , rongxinhuike and Tbea Co.Ltd(600089) . Medium and low voltage DC also includes Beijing Sifang Automation Co.Ltd(601126) , China Energy Engineering Corporation Limited(601868) and a few private enterprises, and the competition pattern is also excellent.
Investment advice
1) Nari Technology Co.Ltd(600406) : as the absolute leader of DC transmission and distribution, dispatching, relay protection and communication, we expect the company’s operating revenue to be 42.4/506/58.4 billion yuan, net profit attributable to parent company to be 5.59/67.9/8.36 billion yuan, EPS to be 1 / 1.22/1.5 yuan / share and PE to be 31x / 26x / 21x respectively from 2021 to 2023. The “overweight” rating was given for the first time, and the target price was 39.18 yuan.
2) Xj Electric Co.Ltd(000400) : with the completion of the equity change of the group and the release of performance flexibility of DC transmission and distribution business, we expect the operating revenue of the company from 2021 to 2023 to be 12 / 14 / 16.1 billion yuan, the net profit attributable to the parent company to be 796 / 1011 / 1207 million yuan, the corresponding EPS to be 0.79/1.00/1.20 yuan / share and the corresponding PE to be 25X / 20x / 16x respectively. The first coverage is rated as “overweight”, with a target price of 24.95 yuan.
3) actively pay attention to the upstream high-power semiconductor and DC capacitor industry chain, such as Xi’An Peri Power Semiconductor Converting Technology Co.Ltd(300831) , Zhuzhou Crrc Times Electric Co.Ltd(688187) , saijing technology, Anhui Tongfeng Electronics Company Limited(600237) , etc.
Risk tips
1) the power semiconductor industry continues to get stuck; 2) The process of energy revolution is blocked; 3) Investment in power grid infrastructure slowed down.
