The hydropower industry has a clear business model, stable cash flow and high dividend yield, which has significant defensive value.
1) phenomenon: Historically, the excess return of SW hydropower index is obvious in the range where the rise of Shanghai composite index is less than zero since 2000. 2) Reason: the hydropower project has a long construction period, large project investment, abundant cash flow after stable operation, clear business model, stable performance, and a high proportion of depreciation in the cost. Therefore, the cash flow guarantee has high bonus and high dividend rate, which has significant defense value. 3) Resources: among the hydropower stations developed and to be developed in China’s “13th National Congress” hydropower bases, except Baihetan Hydropower Station and Wudongde Hydropower Station, the increment of hydropower stations with an installed capacity of more than 5 million kW is almost zero, and high-quality large hydropower is highly scarce. Among them, Jinsha River, Yangtze River and Yalong River are the key hydropower planning bases, and the corresponding companies are China Yangtze Power Co.Ltd(600900) , Sichuan Chuantou Energy Co.Ltd(600674) , Sdic Power Holdings Co.Ltd(600886) .
Hydropower is the most attractive after cross industry comparison. It is suggested to pay attention to [ China Yangtze Power Co.Ltd(600900) ] and [ Sichuan Chuantou Energy Co.Ltd(600674) ].
We select the high dividend yield and undervalued targets in the power, transportation and coal industries for cross industry comparison. It can be found that compared with the transportation industry, new units are still put into operation in the hydropower industry, and growth is the eternal theme in a shares; Compared with the coal industry, the performance and roe of hydropower industry are more stable and less volatile. Therefore, after cross industry comparison, we are optimistic about the hydropower industry and suggest paying attention to China Yangtze Power Co.Ltd(600900) , Sichuan Chuantou Energy Co.Ltd(600674) , Sdic Power Holdings Co.Ltd(600886) and Huaneng Lancang River Hydropower Inc(600025) . 1) Consistently high dividend rate since listing; Ukraine and Belarus asset injection + cascade joint dispatching, significantly contributing to performance increment; Strategic layout of power related asset business at home and abroad, and joint dispatching of water resources through equity ties. 2) Sichuan Chuantou Energy Co.Ltd(600674) : the value is significantly undervalued. The Yalong River water and electricity is endowed with scarce resources and will continue to grow in the next few years; The commissioning of Lianghekou and Yangfanggou hydropower stations contributes to the increment of performance, and the dividend rate is particularly attractive after the dividend proportion is increased.
Under the background of large investment in China’s water pipeline network and water conservancy, ductile iron pipe one Xinxing Ductile Iron Pipes Co.Ltd(000778) .
Policy side: the policy side of water pipe network + water conservancy line is a strong catalyst to guide investment in advance. Water pipe network is the most certain link of infrastructure investment in 2022. At the 11th meeting of the Central Committee of Finance and economics in April 2022, General Secretary Xi pointed out that we should strengthen the construction of network infrastructure such as water conservancy, accelerate the construction of the main skeleton and main artery of the national water network, and orderly promote the construction of underground comprehensive pipe gallery. In the first April of 2022, China completed a total investment of 19.8 billion yuan in water conservancy construction, with a year-on-year increase of 45.5%. Water conservancy infrastructure has made strong efforts.
Target: recommended ductile iron pipe one Xinxing Ductile Iron Pipes Co.Ltd(000778) . Nodular cast iron pipe has become the preferred pipe for municipal water supply pipeline + major water conservancy projects in China. The company’s ductile iron pipe production capacity ranks first in the country, and is much higher than the second. In 2021, the foundry capacity of the company reached 3.2 million tons, ranking second in the industry, with a capacity of less than Shanghai Pudong Development Bank Co.Ltd(600000) tons. We judge that the demand side will benefit from the large investment demand of water pipe network in the next three years. On the supply side, due to the reform of the supply side of the iron and steel industry and the tight supply, we judge that the cast pipe industry is expected to usher in a simultaneous rise in volume and price, and ductile iron pipe one Xinxing Ductile Iron Pipes Co.Ltd(000778) will fully benefit.
Risk warning: macroeconomic downturn, terminal sales electricity price continues to decline under the influence of policies, etc
