2021-12-23 Yin Zhong, Hao Qian and Huang Shuaibin of Everbright Securities Co., Ltd. conducted research on Jiuzhou Group and released the research report "first coverage report: power plant operation has entered the harvest period, and the performance of comprehensive smart energy security in the active layout region has increased." this report gives an overweight rating to Jiuzhou Group, which believes that its target price is 12.55 yuan, while the current share price is 9.89 yuan, with an expected increase of 26.9 percent.

Jiuzhou Group (300040)
The regional leading renewable energy integration operator, plus new energy operation, layout of smart energy projects to promote rapid growth. Jiuzhou Group was founded in 1993 and has been transformed from a smart electrical equipment supplier to a renewable energy construction and operator since 2015. After years of efforts, the company has formed three major business patterns: intelligent equipment manufacturing, renewable energy and comprehensive smart energy. In the first three quarters of 2021, the company achieved operating income of 954 million yuan, an increase of 15.36% over the same period last year, and realized a net profit of 111 million yuan, a year-on-year increase of 97.18%. The company has doubled its power generation, power generation revenue and installed capacity. Renewable energy power generation has become the company's largest business, and the company's transformation has achieved initial results.
Under the background of carbon neutrality, the investment demand of power grid continues to increase, and the business of intelligent electrical equipment grows steadily. Southern Power Grid proposed that it plans to invest 670 billion yuan during the 14th five-year Plan period, an increase of 51 per cent over the actual investment in the 13th five-year Plan. State Grid said it plans to invest 350 billion US dollars in power grid upgrading during the 14th five-year Plan period. The demand for power equipment is expected to increase during the 14th five-year Plan period. The company has been ploughing electrical complete sets of equipment for many years and has become a key complete set of equipment and system solution provider for smart distribution network, and the performance of this sector is expected to maintain steady growth.
With the increase of new energy operation, the scale of operation has increased steadily. As of 2021Q3, all renewable energy power generation projects owned and indirectly held by 2021Q3 have been connected to the grid, including self-owned project scale 460.1MW and indirect project scale 237.5MW, and the new energy assets indirectly held by Q4 through Jiaxing Fund in 2021 will be consolidated. In the future, relying on the geographical advantages of scenic resources and the cooperative relationship with SPIC Group, the competitiveness of the company's renewable energy power generation business is expected to be further enhanced, and the scale of grid-connected new energy projects is expected to maintain steady growth.
Comprehensive intelligent energy is the development direction, and the performance of biomass cogeneration mode has improved steadily. As of October 2021, the company has arranged the scale of biomass cogeneration project to reach 650MW, of which the scale under construction is 160MW. The biomass cogeneration project can effectively solve the problem of open straw burning in the three eastern provinces, with strong support from the local government. Through cooperation with SPIC Group, the company promotes the construction and production of biomass projects. On the one hand, EPC revenue can be realized through project construction, on the other hand, income and profits can be achieved through power generation and heating after the project is put into operation to ensure the continuous improvement of the company's investment income.
For the first time, coverage gives "overweight" rating: the company's 2021-23 return net profit is expected to be 1.60 yuan 3.35 / 383 million yuan respectively, corresponding to EPS 0.27 yuan 0.57 PE 0.65 yuan, the current share price corresponding to 21-23 years PE is 36-17-15 times. With reference to the relative valuation and absolute valuation of the comparable company, the company is given a reasonable valuation level (PE) of 22 times in 2022, corresponding to the target price of 12.55 yuan. Considering that the scale of the company's new energy operating power station will maintain steady growth with the continuous landing of the fund and projects under construction, and the performance increment brought by the superimposed layout of biomass energy projects to the company in terms of construction and investment income, we are optimistic that the company's performance will maintain a high growth trend in 21-23, covering the "overweight" rating for the first time.
Risk hint: the installed capacity of new energy is not as expected; the investment in power grid is not as expected; the operation risk of biomass cogeneration project.

According to the Securities Star valuation analysis tool, Jiuzhou Group (300040) has a good company rating of 2 stars, a good price rating of 2 stars, and a comprehensive valuation rating of 2 stars. (rating range: 1-5 stars, up to 5 stars)