Core view
The pace of renewable energy subsidies is expected to accelerate
On May 11, Premier Li Keqiang chaired an executive meeting of the State Council. The meeting proposed to ensure energy supply, allocate another 50 billion yuan of renewable energy subsidies to central power generation enterprises on the basis of early support, and inject 10 billion yuan through the state-owned capital operation budget to support the rescue of coal power enterprises and more power generation. We expect that the pace of subsequent renewable energy subsidies is expected to accelerate, and the cash flow situation of relevant green power central enterprises is expected to improve significantly, so as to help them accelerate the development and operation of new projects.
Wind power and photovoltaic operation will open up long-term growth space
In the long-term track of new energy power generation investment, the traditional power enterprises facing transformation are expected to become important participants. New energy will be built as the “second growth curve”. Its significant advantages are the abundant cash flow brought by the traditional power basic sector, the highly competitive financing cost and the outstanding ability to obtain resources. In the long run, there is still room for cost reduction of upstream components and fans. In addition, technological progress is also expected to increase the number of power generation hours, which will provide strong support for the long-term stability and good yield of operation links. In the future, wind power generation is expected to continue to obtain the premium of green environmental attributes, and the current main transaction is the energy value of electricity.
Under the new normal of coal price and electricity price, thermal power assets are expected to usher in a bottom reversal
The fundamentals of thermal power are at a dark time, and coal prices and electricity prices are expected to release greater performance flexibility under the new normal. The long-term dislocation of “market coal” and “planned electricity” is expected to be gradually corrected under the guidance of policies. At that time, thermal power will weaken periodically and return to the attribute of public utilities. It is expected to create sufficient cash flow with stable roe return, and support the capital expenditure or considerable bonus sharing scale of transformation and development.
In the medium and long term, in the new power system with new energy as the main body in the future, the fire potential will gradually transition from electric power supply to flexible peak shaving power supply, and is expected to usher in a new cost recovery mechanism. The last round of cash flow in its life cycle will help thermal power enterprises’ “Second Entrepreneurship”, and the former thermal power leaders may have the most potential to become new energy giants in the future.
Investment proposal and investment object
In the subdivided sectors, we are optimistic about the investment opportunities of thermal power, nuclear power and new energy operation; Especially optimistic about the revaluation of the value brought by the transformation of traditional power and the development of new energy.
It is suggested to focus on Huaneng Power International Inc(600011) ( Huaneng Power International Inc(600011) , not rated), Gd Power Development Co.Ltd(600795) ( Gd Power Development Co.Ltd(600795) , not rated), and China National Nuclear Power Co.Ltd(601985) ( China National Nuclear Power Co.Ltd(601985) , not rated) with high-quality assets, leading efficiency and fast pace of new energy transformation. Other suggested targets include China Three Gorges Renewables (Group) Co.Ltd(600905) ( China Three Gorges Renewables (Group) Co.Ltd(600905) , not rated), Fujian Funeng Co.Ltd(600483) ( Fujian Funeng Co.Ltd(600483) , not rated), Zhongmin Energy Co.Ltd(600163) ( Zhongmin Energy Co.Ltd(600163) , not rated), the distribution network energy-saving listing platform of State Grid Chongqing Fuling Electric Power Industrial Co.Ltd(600452) ( Chongqing Fuling Electric Power Industrial Co.Ltd(600452) , not rated), and the core power distribution and integrated energy platform of Three Gorges group Chongqing Three Gorges Water Conservancy And Electric Power Co.Ltd(600116) ( Chongqing Three Gorges Water Conservancy And Electric Power Co.Ltd(600116) , not rated).
Risk tips
The growth space of new energy power generation may be lower than expected; The fundamentals of thermal power may continue to deteriorate; The yield level of new energy operation may be reduced; The promotion of power market-oriented reform may not be as expected.
