Comments on the building decoration industry: "the 14th five year plan" UHV investment is overweight, and the core subject of new power system construction continues to be recommended

Matters: according to the China Energy News, during the 14th Five Year Plan period, the State Grid planned to build the "24 AC and 14 DC" UHV project, involving more than 30000 kilometers of lines, 340 million KVA of substation and current conversion capacity, and a total investment of 380 billion yuan. This year, the State Grid plans to start 13 UHV lines of "10 AC and 3 DC".

UHV construction in the 14th five year plan is overweight, and the leaders of central enterprises in power engineering are expected to benefit. UHV can partly solve the problems caused by long-distance energy allocation across regions and large-scale grid connection of new energy, and plays an important role in building a new power system. According to the 2020 social responsibility report issued by the State Grid: by the end of 2020, a total of 26 UHV projects of "14 AC and 12 DC" have been completed and put into operation. There are 38 "24 AC and 14 DC" projects planned and constructed in the 14th five year plan, with a 38% increase over the end of 2020. UHV investment is expected to usher in a rapid growth during the 14th Five Year Plan period. China Energy Engineering Corporation Limited(601868) and Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) are the leaders of UHV construction, accounting for 74% / 17% of the UHV design market respectively (according to the China Energy Engineering Corporation Limited(601868) prospectus), which are expected to significantly benefit from the acceleration of UHV construction in the future.

Steady growth continues to heat up, and new power systems with high investment efficiency are expected to become an important direction. With the continuous promotion of the double carbon target and the accelerated transformation of energy structure, power investment with high investment efficiency may become one of the key support directions of the follow-up steady growth policy, and its financing environment is also friendly (the central bank launched the carbon emission reduction support tool), and the investment is expected to be significantly strengthened (the investment target of the 14th five year plan of the southern power grid is significantly increased by 51% compared with the investment completion of the 13th five year plan). With the continuous improvement of the policy environment of the power engineering industry chain and the continuous accumulation of financial resources, the relevant leaders are expected to accelerate the growth. In addition to UHV construction, other suggestions focus on: 1) power side: the development of scenery and green power in the 14th five year plan is accelerated, the new energy engineering business is expected to meet the sustained high growth, and the large energy base will strengthen its leading position. 2) Distribution network side: with the increase of new energy consumption demand and the acceleration of distributed energy construction, distribution network is expected to become one of the key investment points of power grid in the future (distribution network accounts for about 50% in the "14th five year plan" investment plan of China Southern Power Grid). 3) Energy storage: according to the relevant planning of the 14th five year plan, compared with the 13th five year plan, the cumulative installed capacity of pumped storage is doubled, and the installed capacity of new energy storage is 10 times. The energy storage industry is expected to usher in rapid development in the 14th five year plan.

Investment suggestions: continue to recommend the core targets of new energy power system construction, focus on and recommend the leaders Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) and China Energy Engineering Corporation Limited(601868) of UHV and green power construction and operation of central enterprises, continue to develop the growth leader Suwen Electric Energy Technology Co.Ltd(300982) of distribution network EPCO for photovoltaic, energy storage and power intelligent operation and maintenance, and the leader of enterprise energy efficiency management system Acrel Co.Ltd(300286) .

Risk tips: UHV construction fails to meet expectations, steady growth fails to meet expectations, new energy development fails to meet expectations, accounts receivable risk and project promotion fails to meet expectations.

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