China Diversified Utilities_ High Power Demand in Sept; We like Pinggao, Sieyuan & Goldwind

Summary of Key Points from the Conference Call Industry Overview - Industry: China Power Sector - Power Demand: PRC power demand rose by 8.5% year-over-year (YoY) to 847.5 million MWh in September 2024, an increase from 7.9% YoY in the first eight months of 2024 [1][2] - Sector Contributions: - Industrial sector: 63% (+3.6% YoY) - Service sector: 20% (+12.7% YoY) - Residential sector: 16% (+27.8% YoY) - Farming and fishing: 1% (+6.4% YoY) [2] Power Generation Capacity - New Capacity Additions: In September, China added 32.6 GW of generation capacity, with: - Solar: 20.9 GW (+32.4% YoY) - Wind: 5.5 GW (+20.8% YoY) - Thermal: 4.8 GW (-6.0% YoY) - Hydro: 1.4 GW (+1.1x YoY) - Nuclear: 0 GW [3][9] - Total New Capacity in 9M24: 242.6 GW (+11.6% YoY) [3] Capital Expenditure (Capex) - Power Grid Capex: Increased by 21.1% YoY to Rmb 398.2 billion in 9M24, with September's capex at Rmb 65.2 billion (+11.8% YoY) [4][10] - Power Plant Capex: Increased by 19.3% YoY to Rmb 98.3 billion in September [4][10] Utilization Rates - Average Utilization: Average utilization of power plants fell by 1.0% YoY to 291 hours in September, with notable changes: - Nuclear: 612 hours (+0.7% YoY) - Thermal: 376 hours (+9.3% YoY) - Hydro: 312 hours (-18.5% YoY) - Wind: 159 hours (+26.2% YoY) - Solar: 97 hours (-11.8% YoY) [5][11] Company Insights - Pinggao Electric Co: Target price set at Rmb 26.00/share based on DCF model, with key risks including lower-than-expected approval processes for UHV transmission line projects [23][24] - Sieyuan Electric: Target price set at Rmb 88.00/share, with risks including lower-than-expected PRC grid capex [25][27] - Goldwind Science & Technology: Target price set at HK$ 5.35/share, with risks including fewer-than-expected new orders and less favorable government policies [21][22][30] Future Outlook - Forecast for Solar Installations: Expected to increase by 18% YoY to 255 GW in 2024E [3] - Long-term Growth: The power demand growth in PRC has been consistently higher than GDP growth, driven by sectors such as AI, data centers, and electric vehicles [1] Additional Notes - Government Policies: The shift towards renewable energy sources is part of China's strategy to reduce emissions, impacting the electricity generation mix [1] - Investment Opportunities: Favorable conditions for grid equipment makers like Pinggao and Sieyuan, as well as wind equipment manufacturers like Goldwind, due to increased capex and demand [1][21][25]