CNECC(SH:601611) Hua Yuan Zheng Quan·2024-06-07 03:00Investment Rating - The report gives a "Buy" rating for the company, marking its first coverage [4][7]. Core Views - The company is a leading player in China's nuclear power engineering construction, benefiting from a significant upturn in the nuclear power sector, which is expected to drive substantial growth in its financial performance [4][14]. - The nuclear power sector is entering a historic boom phase, with expectations of exceeding previous forecasts for engineering construction [4][29]. - The report highlights that the company's potential profitability is underestimated due to significant impairment losses, which are expected to normalize, leading to substantial earnings growth in the coming years [4][9]. Summary by Sections 1. Company Overview - The company is the only global entity that has continuously engaged in nuclear power construction for over 30 years, representing the highest level of nuclear engineering in China [4][14]. - It has undertaken the majority of nuclear power units and island engineering projects in China [4][14]. 2. Market Dynamics - The nuclear power sector is positioned as a key baseload energy source in the new energy system, essential for addressing the challenges of carbon neutrality [4][29]. - China's nuclear power generation currently accounts for less than 5% of total energy production, indicating significant growth potential compared to the global average of 9% and over 20% in developed countries [4][37]. 3. Financial Performance - The company has shown robust revenue growth, with nuclear engineering revenue increasing by 15.03%, 39.99%, and 42.86% from 2021 to 2023 [4][24]. - The report forecasts substantial earnings growth, with net profit expected to increase by over 150% in 2024 if credit impairments are excluded [4][9]. 4. Valuation Metrics - The current price-to-earnings (PE) ratios are significantly lower than comparable companies, with projected PE ratios of 10x, 8x, and 6x for 2024 to 2026 [4][7]. - The report estimates potential net profits of 52.01 billion, 58.68 billion, and 68.69 billion yuan for 2024 to 2026, indicating strong growth prospects [4][7]. 5. Risk Assessment - The report notes that the market has overestimated the risks associated with the company's non-nuclear construction business, particularly in traditional real estate, which has been under pressure [4][9].