J.P. 摩根-中国电力设备行业的关键选择-中国能源设备行业-2018.8.13-47页.pdf
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Asia Pacific Equity Research
13 August 2018
Equity Ratings and Price Targets
Mkt Cap
Price
Rating
Price Target
Company
Ticker
($ mn)
CCY
Price
Cur
Prev
Cur
Prev
Shanghai Electric Group Company Limited
-
H
2727 HK
4,839.68
HKD
2.58
N
—
2.50
—
Dongfang Electric Corporation Limited
-
H
1072 HK
1,874.19
HKD
4.76
N
—
4.80
—
Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 13 Aug 18.
China Power Equipment
Bigger, Greener & More Reliable: Key Picks within
China's Power equipment sector (Ex A-shares)
China
Infrastructure & Industrial
Patrick Xu, CFA
AC
(852) 2800 8577
patrick.n.xu@jpmorgan.com
Bloomberg JPMA PXU <GO>
Karen Li, CFA
(852) 2800-8589
karen.yy.li@jpmorgan.com
Calvin C Wong, CFA
(852) 2800 8502
calvin.wong@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
See page 45 for analyst certification and important disclosures, including non
-
US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its resea
rch reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this rep
ort as only a single
factor in making their investment decision.
We initiate coverage of the power equipment sector with a preference for
Transmission & Distribution (T&D) equipment suppliers over generation
equipment suppliers. We see growth in grid investments accelerate to 14-15%
growth p.a. in 2019-20 from -1% in 2017 driven by China’s need of a bigger,
greener and reliable power grid, while generation investments could decline.
Bigger: The State Grid needs to add >150,000km of transmission lines p.a.
in 2019-20 vs the average of 48,000km a year in 2016-18 to reach its length
target by end 2020. We think the target seems stretched, but do expect
additions of 50/61,000km transmission lines in 2019/20 to narrow the gap.
Greener: 6.7% of the power generated in 2017 was lost over transmission
vs the target of <6.0% by 2020. The network needs upgrading towards
higher voltages to help achieve the goal. We estimate this to drive the unit
construction cost to RMB6.7mn/km in 2020 from RMB4.4mn/km in 2017.
More reliable: Households in China had on average 15 hours’ of blackout
in 2017 vs the average of 1 hour of G7 countries. We forecast 7% CAGR of
investments on the distribution networks to raise the reliability of the grid.
Stock picks: We are Neutral on the H-shares of Shanghai Electric and
Dongfang Electric due to declining demand for thermal power equipment.
Valuation, catalysts and risks: Our price targets are based on DCF
analysis, cross-checked against P/E vs EPS growth. Our OW-rated stocks
trade below or in line with peers’ average P/E with growth premium.
Positive surprises from grid investments or power consumption could be
catalysts for the sector. The key risk is a break-up of the State Grid that
could disrupt the supply chain.
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