Judging from the world's major countries capable of developing nuclear power, supporting nuclear power expansion to help carbon neutrality has become a common goal since this year. Last month, eight countries, including France, Poland, the Czech Republic, and Hungary, called on the European Commission that the “green” industry should include nuclear power plants and nuclear waste storage facilities; France, which has a nuclear power generation capacity of up to 70%, also announced that it will restart the construction of nuclear reactors and fulfill its emission reduction commitments.

Back in our country, our nuclear power policy has also shown signs of loosening. “The Return of Nuclear Power 丨 The “Wind and Light Market” is hot, and nuclear power is also gaining strength!” As mentioned in the article, in the context of “carbon neutrality,” China is supported by inherently safe nuclear power technology, which is leading the world, so it can propose a plan to “actively develop nuclear power in a safe and orderly manner.”

Since August, China's leading nuclear power company China General Nuclear Power Company (003816.SZ, 01816.HK) has experienced a wave of increases in both A-share and Hong Kong stock markets, and declined somewhat in early October. A number of brokerage firms gave CGN a “buy” or “increase holdings” rating.

Taking advantage of the “carbon neutrality” trend, will CGN start the next gold growth cycle?

The installation scale is the highest in the industry, and the net interest rate is leading

In China's nuclear power industry, the two giants, China General Nuclear Power and China Nuclear Power, “split up and fought”. China General Nuclear Power has a larger scale of nuclear power compared to China's nuclear power.

In terms of nuclear power assembly capacity, China Nuclear Power currently operates and manages 25 nuclear power units in operation, with an installed capacity of 28.26 million kilowatts, accounting for 53% of the country's commercial nuclear power units; China's nuclear power operation and management manages 24 nuclear power units, with an installed capacity of 22.509 million kilowatts, accounting for 42.25% of the country's commercial nuclear power units.

CGN relies on the central enterprise CGN Group and is the platform for the latter's nuclear power business. Just as CNNC, the controlling shareholder of China Nuclear Power, owns the entire industry chain, the CGN Group also has a wide range of businesses, including nuclear power development, nuclear power technology research and development, and nuclear power engineering contracting. In terms of technical strength, China General Nuclear Power has mastered the world's main third-generation nuclear power technology and has corresponding construction, operation and maintenance capabilities. The nuclear power projects currently under construction mainly use third-generation nuclear power technology.

Furthermore, Uranium Corporation, a subsidiary of the China General Nuclear Power Group, is qualified to specialize in the import and export of nuclear fuel. It develops uranium resources in Kazakhstan, Uzbekistan, Australia, etc., which will help bring a stable supply of natural uranium to China General Nuclear Power.

What has an advantage over China's nuclear power is that CGN has the ability to integrate design, construction, and operation. It can control the whole process of design, procurement, construction, and operation, and can carry out comprehensive cost control from the beginning of nuclear power plant design.

Especially when it comes to nuclear power plant construction, this is an extremely expensive investment. CGN has a wholly-owned subsidiary engineering company. The company has integrated service capabilities such as engineering design, project procurement, construction management, and commissioning, so construction costs are lower than China's nuclear power. China Nuclear Power, on the other hand, requires enterprises under its parent company to provide engineering construction contract services. In the first half of this year, a service amount of 19.252 billion yuan was implemented for this service.

The operating cost of electricity per kilowatt-hour (kilowatt hour) of electricity in the power sector is an indicator that measures the ability of nuclear power operators to manage and control costs. It refers to the operating cost of selling electricity per kilowatt-hour (kilowatt hour) of electricity. In 2018, when CGN and China Nuclear Power revealed detailed data, their operating costs of electricity were 0.182 yuan/degree and 0.208 yuan/kW respectively. CGN's power operating costs were clearly superior to China's nuclear power, indicating that cost control of integrated capabilities was beneficial to increasing profit levels.

Data shows that from 2015 to 2020, CGN's net interest rate level was higher than that of China Nuclear Power. In the first three quarters of this year, affected by the payment of spent fuel disposal funds by some units and the increase in the construction volume of nuclear power projects, the 28% increase in operating costs of CGN during the reporting period was higher than the 17% increase in revenue. As a result, its net interest rate declined somewhat, and was overtaken by China Nuclear Power.

In terms of performance, CGN's revenue increased year by year, with revenue of 70.585 billion yuan in 2020, a compound annual growth rate of 21.33% over the past 5 years, and a compound annual growth rate of 7.3% in net profit over the same period. In the same period, China Nuclear Power's revenue and net profit grew at 14.8% and 9.66% respectively. The compound annual growth rate of CGN's net profit is low. The main thing is that although the growth rate of the construction installation and design service business has been good in the past few years, the profit level of this business is far below that of the electricity sales business, thus dragging down the company's profit growth.

There is something interesting about the new scale of China's general nuclear weapons

Unlike China's nuclear power, which is involved in non-nuclear clean energy, CGN focuses more on the development of the nuclear power business and does not involve the non-nuclear clean energy business. This also makes CGN an A-share listed company that operates a single nuclear power generation business.

However, China General Nuclear Power has an advantage over China's nuclear power in terms of the future development potential of its nuclear power business, as it specializes in the hard bone of “using” nuclear power.

Since 2020, no nuclear power units have been put into commercial operation of CGN, resulting in total installed capacity remaining at 27.14 million kilowatt-hours.

To achieve an increase in installed capacity and power generation in the future, it is essential that nuclear power units under construction be converted to commercial use. Compared with China's nuclear power, CGN has 7 nuclear power units under construction in the first half of this year, with an installed capacity of 8.21 million kilowatts, an increase of 30% over the current installed capacity. In the same period, China Nuclear Power had 6 nuclear power units under construction, with an assembly capacity of 6.258,000 kilowatts. China's general nuclear power was nearly 2 million kilowatts more than China's nuclear power.

Also worth noting is thatIn the next year, the number of nuclear power units put into commercial operation by China General Nuclear Energy and the additional installed capacity will far exceed China's nuclear power, and it will continue to occupy the crown of its industry.According to CGN's performance report, the Hongyanhe Unit 5 was put into commercial operation in the second half of the year, and the company's on-board assembly capacity increased from 27.14 million kilowatts to 28.26 million kilowatts.

Next year, CGN will be a big year for nuclear power units to “make dumplings.” The company's Fangchenggang Unit 3 and Unit 4 are expected to be put into commercial operation next year, and Hongyanhe Unit 6 is also expected to be put into commercial operation in the first half of next year. A total of 3 nuclear power units will be put into commercial operation during the year, adding about 3.5 million kilowatts of installed capacity to the company. At that time, it will drive a rapid increase in the company's total installed capacity and drive profit growth. According to company data, if we calculate the average annual utilization hours of 7,500 hours, it is estimated that the power generation capacity of 53 billion kilowatt-hours will increase each year after the six units under construction are put into operation.

However, China Nuclear Power will have no new nuclear power units put into commercial operation in 2022-2023. The Zhangzhou Units 1 and 2, which have already started construction, are expected to be put into operation from 2024 to 2025, which means that the company's total installed capacity will not increase in the next two years.

It is worth noting that from 2023 to 2024, the total installed scale of China's general nuclear power plant will enter the platform period, and there is a possibility that the scale of additional nuclear power units invested in commercial operation will slow down at that time.

Most of the nuclear power units under construction in China use third-generation technology. Among them, the units under construction of CGN's subsidiaries all use Hualong 1 third-generation technology. Nuclear power units with this technology have more efficient power generation capacity and safety performance. In addition to the Hainan Xiaodui project, the seven nuclear power units currently under construction by China Nuclear Power also use third-generation nuclear power technology.

According to the “China Nuclear Energy Development Report (2020)”, China's independent third-generation nuclear power plants will achieve large-scale batch development according to the approval pace of 6-8 units per year. As two leaders in the field of nuclear power operation, CGN and China Nuclear Power are expected to continue to enjoy the dividends of nuclear energy growth under the “carbon neutrality” strategy in the future.