The approval process for nuclear power has been accelerated, and the positioning of nuclear energy in China's clean energy low-carbon system during the “14th Five-Year Plan” period will be more clear and its role will be prominent.
The Zhitong Finance App learned that Everbright Securities released a research report saying that the nuclear power approval process is accelerating, and the positioning of nuclear energy in China's clean energy low-carbon system during the “14th Five-Year Plan” period will be more clear and its role will be prominent. According to the “China Nuclear Energy Development Report (2020)”, nuclear power construction is expected to continue to advance steadily according to 6-8 units per year; 10 new nuclear power units were approved in 2022 and 2023. China's nuclear power approval has been restarted, and supporting policies are frequent, and the installed volume of nuclear power is expected to increase steadily; the highly profitable third-generation Hualong 1 unit is a key model in the recent layout, and profit space for nuclear power operators is gradually expanding. At the same time, as the share of nuclear power participating in market-based transactions continues to increase, the average feed-in tariff for nuclear power is expected to continue to rise.
The main views of Everbright Securities are as follows:
After 2020, under the guidance of the “double carbon” target, nuclear power will recover at an accelerated pace
In 2022, China approved 10 new nuclear power units, put into commercial operation 3 new nuclear power units, and started construction of 5 new nuclear power units. In 2023, China approved 10 new nuclear power units. A total of 4 units were started: CNNC Sanmen Nuclear Power Unit 4, China General Nuclear Power Lufeng Nuclear Power Unit 6, China National Power Investment Corporation Haiyang No. 4, and China Nuclear Power Xudabao No. 1. According to the “China Nuclear Energy Development and Prospects (2022)”, China's autonomous third-generation nuclear power generation is expected to advance steadily at the pace of approval of 6-8 units per year; according to the “14th Five-Year Plan”, the positioning of nuclear energy in China's clean energy low-carbon system will be more clear, and its role will be more prominent.
It is estimated that in the high/medium/low scenario, the installed capacity of nuclear power will reach 106/1.00/93 million kilowatts in 2030
Everbright Securities said that it is expected that China's energy development will be predicted by dividing China's energy development into three different scenarios. Nuclear power and new energy are developing rapidly at an average annual rate of 8-10 units; in the medium scenario, nuclear power is developing in an orderly manner, and nuclear power installations are growing at an average annual rate of 7-8 units; in the low scenario, new energy is developing by leaps and bounds, energy storage technology is being deployed, and nuclear power is developing moderately. Nuclear power plants are growing at an average annual rate of 5-6 units. Under the high/medium/low scenarios, China's nuclear power installations are expected to reach 106/1.00/93 million kilowatts in 2030, respectively.
The domestically developed technology Hualong No.1 has the advantage of construction costs, and the overall economy is good
The equalized electricity cost (LCOE) is calculated according to the unit type, and the market is divided into three optimistic/neutral/pessimistic situations, corresponding to a discount rate of 3%/8%/10%, then the AP1000 equalized electricity costs for third-generation units are 0.230, 0.380, and 0.452 yuan/kilowatt-hour, respectively; the leveled electricity costs for EPR units are 0.256, 0.443, and 0.532 yuan/kilowatt-hour, respectively; Hualong 1's leveled electricity costs are 0.211, 0.334, and 0.394 yuan/kilowatt-hour, respectively. In a neutral scenario, Hualong 1 is more economical when there is a price subsidy for third-generation units. The initial cost of introducing the AP1000 and EPR units was too high, which led to poor economy. Referring to the Sanmen Phase I nuclear power project, which is also a third-generation unit and is also located in Zhejiang Province (the trial price is based on 0.4203 yuan per kilowatt-hour), the IRR of the Hualong 1 project with a construction cost of 16,800 yuan/kilowatt is close to 10%.
Key recommendation: Nuclear power operators currently mainly focus on China General Nuclear Power and China Nuclear Power
According to the forecast of Everbright Securities, the 24/25 EPS of China General Nuclear Power (003816.SZ) and China Nuclear Power (601985.SH) was 0.23/0.26 yuan and 0.59/0.65 yuan, respectively. The PE corresponding to the current stock price is 17X/15X and 16X/14X, respectively. Consider: 1) the increase in the scale of units under construction and approved to be built after nuclear power approval was accelerated; 2) For hydropower with a target business model similar to nuclear power, the overall valuation of the nuclear power sector is lower than the average level of the defense sector (hydropower). Covered for the first time, it was rated as a “buy” by China General Nuclear Power and China Nuclear Power.
Risk analysis: Marginal decline in market-based electricity prices, nuclear power operation safety risks, project construction progress falling short of expectations, unattainable or inaccurate calculation assumptions, resulting in errors.