Fu Neng Shares (600483): Fujian Offshore Wind Power Being Underestimated By The Market

Fujian electric power leading enterprises, 18 years of growth, an increase of 24.52% over the same period

Fujian Fu Neng Limited by Share Ltd is a leading power enterprise in Fujian province. The company was backdoor listed in 2014, and the company actually controls the Fujian SASAC. By the end of April 2019, the company's installed capacity reached 4 million 881 thousand kilowatts, of which the installed capacity of wind power reached 754 thousand kilowatts, accounting for 24.32% of the installed capacity of wind power in Fujian. At present, the company has approved the installed capacity of 1 million 91 thousand kilowatts, including 133 thousand kilowatts on land wind power, 898 thousand kilowatts of offshore wind power, 60 thousand kilowatts of combined heat and power, and the increase of installed capacity mainly comes from offshore wind power. Benefiting from the rapid upgrading of thermal power generation capacity, the company's profitability has been repaired. In 2018, the company's operating income was 9 billion 354 million yuan, an increase of 37.58% over the same period last year, and its net profit to the parent company was 1 billion 50 million yuan, an increase of 24.52% over the same period last year.

Fujian's wind power resources are outstanding, and the company is working hand in hand with the Three Gorges group to develop offshore wind power.

Fujian belongs to the category IV wind area, with good wind resource and a green warning area for wind power. In 2018, the utilization hours of wind power in Fujian were 2587 hours, which was 492 hours higher than the national average level. For many years, it was the highest number of wind power generation units in the country. Fujian's offshore wind power has a strong profitability. The net electricity profit of Putian Ping Hai offshore wind farm phase I project is 0.3 yuan / degree, much higher than other wind power projects.

The offshore area of Fujian is close to the load center of the power grid. The access line is short and the traffic conditions are good. It has better conditions for offshore wind farm construction and is suitable for large-scale offshore wind power development. By the end of 2020, the installed capacity of offshore wind power in Fujian will reach more than 2 million kilowatts. At present, the installed capacity of offshore wind power is only 136 thousand kilowatts, and there will be huge room for development. The company is working hand in hand with the Three Gorges group to jointly develop offshore wind power resources in Fujian province. The scale of the offshore wind power in the construction of the sea reaches 899 thousand kilowatts, and the offshore wind power project currently stored by the company reaches 2 million kilowatts.

Thermal power project quality resources, coal prices downward repair profitability

At present, the scale of coal-fired machine assembly is 2 million 556 thousand and 100 kilowatts, accounting for 52.8% of the total installed capacity of the company. The thermal power units of the company have excellent assets. The annual heat output of the combined heat and power projects is about 4 million tons, and the power supply is about 6 billion degrees, and the production and marketing are stable. The company purchased six branches of Huarun, located in Liupanshui City, Guizhou province. It is running 2 sets of 660 thousand kilowatts supercritical coal-fired generating units. It belongs to the pit power plant and coal electricity integration project. The surrounding coal resources are relatively abundant, the cost of coal transportation is low, and the purchasing price is low. In 2019, the supply and demand of coal will shift from tight balance to loose supply. We expect that the center of coal prices will see a clear downward trend in 19 years, and the price center is expected to fall to 580-600 yuan / ton, and the profitability of the company will continue to be repaired.

Gas and electricity policy returns to profitability on the ground, and nuclear power will provide incremental performance in the future.

The company has 4 350 thousand kilowatts large gas generating units, which are the peak regulation power plants. The company's profits are mainly affected by the series policies of natural gas power generation in Fujian province. The price of natural gas and the price of electricity on the Internet are determined by Fujian Provincial Price Bureau. The replacement electricity quota is determined by the Fujian Provincial Commission of letters and the price bureau, and the net profit fluctuates greatly. In April 2nd of 19, the company received the notice on the transfer of LNG power generation indicators in 2019. If the other business environment changes little this year, the company's gas and electricity business net profit in 2019 is expected to reach 84 million yuan.

The company shares and builds a nuclear power project of about 16 million kilowatts, with an installed capacity of about 3 million 800 thousand kilowatts, with an investment amounting to 90 million 530 thousand yuan. Among them: the nuclear power project of 600 thousand kilowatt fast neutron reactor built in Xiapu nuclear power plant started construction in December 2017; Ningde nuclear power two phase 5, 6# generating unit and Huaneng Xiapu nuclear power 1-4# unit actively promote project approval, providing performance increment for the future.

Earnings forecasts and Valuation:

We expect the company to achieve operating income of 95.36, 104.73 and 11 billion 491 million yuan in the next 2019-2021 years, up 1.94%, 9.83% and 9.72%, and achieve net profit of 13.73, 17.08 and 1 billion 973 million yuan, up 30.66%, 30.66% and 30.66%, EPS, PE, and $respectively.

The company's composite growth rate will reach 23% in the next three years, while PE is less than 10 times, which is obviously underestimated. It will be given a "strong recommendation" rating for the first time.

Risk warning: the risk of electricity price reduction, the risk of offshore wind power production is not up to the expected level, the risk of fluctuating wind conditions and the risk of rising coal prices.