Key investment points:
Since new year’s day, the green power sector has continued to decline, mainly due to: 1) firstly, under the tone of stable growth, the market is worried about the shift of energy consumption dual control policy and the restart of bad green power from coal and electricity: 2) Secondly, thermal power transformed into new energy enterprises, with serious losses in thermal power business, especially in the fourth quarter, which significantly exceeded expectations, affecting market sentiment; 3) Finally, according to IFR, China Resources is considering the spin off of renewable energy business for listing in Hong Kong. The potential spin off has led to investor disappointment and raised concerns about the follow-up and spin off of thermal power transformation new energy enterprises.
Scenery investment has been continuously promoted, which is in line with the general direction of steady growth. Wind power photovoltaic is a part of new energy infrastructure. Promoting the installation of new energy will help to improve China’s energy structure and alleviate the shortage of electricity. At the same time, the scale of wind power and photovoltaic industry chain is huge and there are many people. Increasing investment in wind power and photovoltaic field can also become an important means to smooth China’s economic cycle. The single investment amount of wind power project is large, which has a great pulling effect on economic growth. Taking Guangdong power a as an example, it was announced in November 2021 that a 1 million KW offshore wind power project would be proposed, with an investment amount of more than 17 billion. The growth of new energy installed capacity has also promoted the investment growth of supporting UHV and energy storage equipment. During the “14th five year plan” period, the State Grid is expected to plan and build 24 AC and 14 DC UHV projects, design lines of more than 30000 kilometers, and a total investment of 380 billion yuan.
The growth of coal power installed capacity ensures the consumption of new energy. The proportion of China’s non fossil energy consumption is expected to reach more than 20%, 25% and 80% respectively in 2025, 2030 and 2060. In the new power system with photovoltaic and wind power as the main power generation, the intermittence and randomness of new energy power generation put forward requirements for peak shaving demand. In this context, the growth of thermal power will not occupy the growth space of new energy, but also help to release the growth space of green power and help build a new power system. Thermal power is one of the best ways to improve the flexibility of power system. The national development and Reform Commission and the national energy administration have made it clear that during the “14th five year plan” period, 200 million kw of the flexibility transformation of the existing coal motor units will be completed, and the system regulation capacity will be increased by 30-40 million KW. The flexibility transformation of the existing coal motor units should be improved as much as possible to promote the consumption of clean energy.
Electricity prices return to commodity attributes, and thermal power ushers in profit recovery. The floating range of electricity price is adjusted to 20%, the electricity price of high energy consuming industries is not limited, and the profit of thermal power is expected to be optimized. It is expected that the power supply will maintain a tight balance pattern in 2022, and the power price center is expected to move up. According to the signing of the long-term agreement in 2022, the upward trend of thermal power price is determined, and the green power transaction premium rises. The average transaction prices of Jiangsu and Guangdong Provincial Governors’ associations increased by 19.36% and 9.7% respectively compared with the benchmark price. The price mechanism of the coal long-term association was adjusted, and the setting was continuously increased to ensure the supply of coal. The benchmark coal price has been adjusted for the first time since 2017, and the floating range of 550 yuan / ton to 850 yuan / ton is clearly given. The degree price difference returned to stability, and thermal power returned to the attribute of public utilities. The lock-in of coal price ceiling and the promotion of electricity price reform usher in the upward cycle of thermal power, and the value revaluation of thermal power assets is about to usher in.
It is difficult to split assets, and there is no worry in the short term. The threshold for spin off listing is high. The spin off of A-Shares and Hong Kong shares is restricted by the profitability and the wishes of minority shareholders. For example, the Listing Rules of the Hong Kong Stock Exchange require that the net profit attributable to the parent company of a new applicant in the latest year shall not be less than HK $20 million, and A-Shares require continuous profits in the past three years and the cumulative net profit attributable to the parent company shall exceed RMB 600 million. At the same time, In the consolidated statements of the listed company for the most recent fiscal year, the net profit of the subsidiary to be separated according to equity shall not exceed 50% of the net profit attributable to the parent company.
Affected by market sentiment, many high-quality underlying stock prices have fallen to a lower valuation level. Taking peg as the valuation index, many high-quality stocks have peg below 1, Shanghai Electric Power Co.Ltd(600021) (0.23), Jilin Electric Power Co.Ltd(000875) (0.41), Cecep Wind-Power Corporation(601016) (0.50), Huaneng Power International Inc(600011) (0.50) and Cecep Solar Energy Co.Ltd(000591) (0.54) lower than or close to 0.50 (based on the data on January 14, 2022). Considering the long-term improvement of the whole sector, at present, many high-quality enterprises are in the state of undervaluation, and the configuration has high cost performance at this time.
Investment suggestion: Although the green power sector has made a big correction since the beginning of the year, it is mainly due to the impact of short-term sentiment. It is expected that the profit of thermal power will improve, the green power under the main line of carbon neutralization will improve for a long time, and maintain the “recommended” rating of the industry. In terms of individual stocks, it is suggested to pay attention to Huaneng Power International Inc(600011) , China Resources Power, Shanghai Electric Power Co.Ltd(600021) , Fujian Funeng Co.Ltd(600483) , Huadian Power International Corporation Limited(600027) , Guangzhou Development Group Incorporated(600098) , Guangdong power a, Shenergy Company Limited(600642) ; Longyuan Power, Tianjin Guangyu Development Co.Ltd(000537) , China Three Gorges Renewables (Group) Co.Ltd(600905) , Nyocor Co.Ltd(600821) , Cecep Solar Energy Co.Ltd(000591) , Jilin Electric Power Co.Ltd(000875) , Zhongmin Energy Co.Ltd(600163) , the subject of new energy power generation; Distributed photovoltaic targets Jinko Power Technology Co.Ltd(601778) , Zhejiang Chint Electrics Co.Ltd(601877) , Jiangsu Linyang Energy Co.Ltd(601222) , Ganghua gas, Skyworth Group, Zhejiang Sunoren Solar Technology Co.Ltd(603105) , Hangzhou Star Shuaier Electric Appliance Co.Ltd(002860) .
Risk tip: focus on the continuous decline of the company’s share price, the rise of coal price affects the recovery of thermal power profits, the installed capacity of new energy is not as expected, the price of silicon material in the upstream of photovoltaic rises, and the risk of policy change.
