China and its neighbors realize grid interconnection

News Background: General Manager of the State Grid Corporation of China Shu Yinzhao said at the APEC summit that China and neighboring countries have great potential for expanding the scale of grid interconnection and interoperability. Shuyin Yin said that the "One Belt and One Road" strategic concept has enabled China and neighboring countries to realize interconnection and interoperability of power infrastructure. At present, China has established 18 transnational transmission channels with neighboring countries. China’s neighboring countries are rich in energy resources and have strong complementarities with China, and the grid has great potential for interconnection and interoperability.

Shu Yinzhe further explained that China and neighboring countries have three key points for achieving electricity interconnection: one is the transmission corridor of the Silk Road Economic Belt, and the construction of transmission routes from China's Xinjiang to the five Central Asian countries; the second is Russia and Mongolia's transmission channels to China; The third is the networking channel with neighboring countries in the south. At present, a number of projects have been initiated in Russia's Far East to China.

Investor perspective:

@ Wind Whisperer: The performance of the power stocks this year is still relatively stable. I have held Guodian Power's contribution to my overall account earnings this year has reached 20%. With this alone, I have been very satisfied.

@ Loneliness cigarette butt: Regardless of how the economic structure will be transformed in the future, the electricity consumption of the entire society must be guaranteed. This is the reason why I prefer power stocks. In addition to this, the vast majority of power companies are now state-owned enterprises and also involve the concept of reform of state-owned enterprises. In the long run, power stocks are always a subject worth investing in.

Industry observations:

According to the latest quarterly report, the performance of electric companies has maintained steady growth, but the growth rate has dropped significantly year-on-year. According to Dongguan Securities Research, the operating income of the power industry in the first three quarters of 2014 decreased by 0.07% year-on-year, representing a year-on-year decrease of 18.08%; the industry's net profit rose by 18.5% year-on-year, but the growth rate dropped sharply by 96.6 percentage points year-on-year. Affected by the economic downturn and the declining growth of electricity consumption in the whole society, the operating income of the industry declined slightly year-on-year. The sharp decline in profit growth was mainly due to the large growth rate in the same period of last year. This year's high growth rate is difficult to sustain and the overall power industry profits. Return to a reasonable level of growth.

Haitong Securities Research reported that from the breakdown of industry segments, from January to September 2014, there were 22 companies with a net profit increase of more than 40% in listed companies in the power industry. The industries were concentrated in the power transmission, distribution, and energy conservation and environmental protection sectors. There are four each. In addition, there are three smart grids; two power generation equipment, power supplies, power plants, and industrial automation; and one low-voltage electrical appliance. Among them, the growth rate of the power supply sector was relatively fast, with revenue increasing by 37.21% year-on-year, and net profit increasing by 27.25% year-on-year, mainly due to the explosive growth of Yishite (the distributed photovoltaic products of Yishite inverters, combiner boxes, and DC cabinets). Ding Han technology to pull.

Shenyin Wanguo pointed out that the National Development and Reform Commission recently issued the "Notice on the Implementation of the Pilot Program for Transmission and Distribution Prices Reform in Shenzhen", which marked the official launch of the new round of pilot reforms in transmission and distribution pricing in China. The reason why China Southern Grid is located is because the South China Power Grid has a simpler mechanism and a smaller volume than the national grid, and it is easier to get started. Shenzhen is the flag and symbol of domestic reform and opening up. The reform pilot is far-reaching. The South Network reform began and the State Grid will not be far behind.

Investment Opportunities:

Shenyin Wanguo believes that the current power industry's withdrawal of production capacity and the integration and transformation of enterprises are still the main melody. Under the background of non-increasing total amount, structural opportunities and bottom-up are still the main ideas for stock selection. From the perspective of the value chain, the profits of power grid transfer are expected to be shared upstream and downstream of the industrial chain, and the regional leading enterprises with resources are optimistic. The relevant targets are mainly concentrated in the public utility sector, and the enterprises with equipment resources include TBEA, Zhengtai. Electrical appliances (group companies), Goldwind Technology, etc. In addition, Shenyin Wanguo also proposed to pay attention to the investment opportunities of the State Grid's overall listing, such as Guodian Nanrui (listed by the State Grid Power Institute of Science and Technology) and Beijing Career (China Electric Power Research Institute holds 10% of shares).

Dongguan Securities proposes to focus on two main lines: First, low-cost, low-cost hydropower companies. It is recommended to pay attention to the high-quality water power producers—SDIC Power and Yangtze Power, and pay close attention to Guiguan Power and Wuyuan Power; secondly, the pilots for electric power reform are more specific, and local companies with low valuations, such as Guangzhou Development, Chenneng Electric Power and Tian Rich energy.

First, nuclear power: Shenneng shares, Wall nuclear materials, Oriental Zirconium, Zhejiang Power, Shanghai Electric

II. Hydropower: SDIC Power, Yangtze Power, Guiguan Power, Wuyuan Power

III. Thermal Power: Guangzhou Development, Chenneng Power, Tianfu Energy

Wind Power: Yuedian Power A, Huaneng Power International, Guodian Power

V. Power Reform: State Power NARI, Beijing Carey

6. Smart Grid: Pinggao Electric, TBEA, Dalian Electric Porcelain, XJ Electric

VII. Power Transmission and Transformation: Zhongneng Electric, Kehua Hengsheng, Madi Electric, Sun Cable, Jinlihua Electric

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