Core view
One week market review: this week, the CSI 300 index fell 4.19%, the public utilities index fell 0.48%, the environmental protection index fell 4.77%, and the weekly relative yields were 3.71% and – 0.58% respectively. Among the 31 primary industry categories of Shenwan, the increase of public utilities and environmental protection ranked second and 20th. Among the sub sectors of the power sector, thermal power rose by 1.29%; Hydropower rose by 1.39%, and new energy power generation fell by 6.75%; Water sector fell 4.30%; Gas sector fell 3.05%; Testing services fell 1.40%.
Comments on changes: the expectation of high coal price control was enhanced, and the thermal power sector rose 1.29%, of which Huaneng Power International Inc(600011) rose the most, up 9.08%; Hydropower sector rose 1.39%. This week, the State Council approved six nuclear power units, which was good for nuclear power enterprises, Cgn Power Co.Ltd(003816) up 6.62%. The water sector fell 4.30%, and the Jiangxi Hongcheng Environment Co.Ltd(600461) annual report disclosed good performance, up 2.64%. The gas sector fell by 3.05%, and Xinjiang East Universe (Group) Gas Co.Ltd(603706) rose by 15.71%.
Important event: Premier Li Keqiang chaired an executive meeting of the State Council on April 20 to determine measures to ensure and increase energy supply and improve the guarantee capacity of energy for economic and social development. The three new nuclear power unit projects that have been comprehensively evaluated and reviewed and incorporated into the national plan shall be approved.
Special research: on the one hand, China’s offshore areas have high wind speed and abundant wind resources. The offshore wind power with a water depth of 50 meters and a height of 70 meters is expected to develop up to 500 million kilowatts. On the other hand, offshore wind power consumption conditions are more superior, which is the best choice for coastal provinces to develop new energy. By the end of 2021, the number of offshore wind turbine units in operation nationwide reached 26gw. By April 2022, all provinces have announced the new energy development plan of the 14th five year plan. According to the data released by the provincial development and Reform Commission, more than 50gw of offshore wind power will be installed during the 14th Five Year Plan period, mainly in Shandong 5GW, Jiangsu 9.09gw, Guangdong 17gw, Zhejiang 4.5gw, Fujian 13.3gw, Guangxi 3gw and Hainan 3gw.
Investment strategy: Public Utilities: 1. The reform of electricity marketization is promoted, and the electricity price can better reflect the value of supply and demand, cost and environment. The construction cost of new energy continues to decline. New energy operators have “triple” certainty, and the growth rate of “quantity” – scenery installation has high certainty; “Price” – the price of thermal power rises, the green premium is superimposed, and the profit space of green power is opened; “Performance” – last year’s low-cost wind turbine and rush to install sea breeze ensured this year’s performance. 2. The policy promoted the optimal combination of coal and new energy. The policy of Changxie coal price + Changxie electricity price is expected to be implemented, the linkage mechanism is formed, the market-oriented trading of coal and electricity is expanded, and the turning point of thermal power profit appears. 3. The construction of new power system with new energy as the main source will deeply benefit new energy power producers and comprehensive electric energy services. Recommend good cash flow, “nuclear power and new energy” two wheel drive China National Nuclear Power Co.Ltd(601985) ; It is recommended to actively transform new energy sources with abundant cash flow, leading thermal power Huaneng Power International Inc(600011) etc; New energy operation leader China Three Gorges Renewables (Group) Co.Ltd(600905) , Longyuan Power with capital cost and resource advantages; Comprehensive electric energy service Suwen Electric Energy Technology Co.Ltd(300982) . Environmental protection industry: 1. High performance and low valuation; 2. 3. Continuous improvement of cash flow and business indicators: continuous improvement of business income. Recommend recycled paper as the leading Zhejiang Rongsheng Environmental Protection Paper Joint Stock Co.Ltd(603165) .
Risk warning: the environmental protection policy is not as expected; The growth rate of power consumption decreased; Electricity price reduction; The terminal price of natural gas has been reduced.
