Core Insights - China's energy self-sufficiency rate has remained above 80% during the "14th Five-Year Plan" period, ensuring energy security for over 1.4 billion people [3][4][5] - The country has made significant strides in renewable energy, becoming a global leader in wind and solar power installations, contributing to a robust energy transition [6][7] Energy Production and Consumption - China's energy production accounts for over 20% of the global total, with the largest renewable energy system in the world and the largest electric vehicle charging network [3][5] - The energy consumption increased by 9.8 million tons of standard coal during the first four years of the "14th Five-Year Plan," with over 90% of this increase met by domestic supply [5] Renewable Energy Development - The installed capacity of wind and solar power has surged from 530 million kilowatts in 2020 to 1.68 billion kilowatts by July 2023, with an annual growth rate of 28% [6] - Wind and solar power accounted for 18.6% of total electricity consumption by 2024, up from 9.7% in 2020, with wind and solar generation reaching 1.15 trillion kilowatt-hours in the first half of 2023 [6] National Power Market System - The construction of a unified national electricity market has made significant progress, with trading volumes increasing from 10.7 trillion kilowatt-hours in the "13th Five-Year Plan" to 23.8 trillion kilowatt-hours [7] - The proportion of market transactions in total electricity consumption has risen from 40% in 2020 to over 60% for four consecutive years [7]

Core Insights - During the "14th Five-Year Plan" period, China has established the world's largest and fastest-growing renewable energy system, with the share of renewable energy generation capacity increasing from 40% to approximately 60% [1] Group 1: Energy Supply and Self-Sufficiency - China's energy self-sufficiency rate has consistently remained above 80% during the "14th Five-Year Plan" period, demonstrating strong energy supply capabilities [2] - In July, China's monthly electricity consumption exceeded 1 trillion kilowatt-hours for the first time, equivalent to Japan's total annual electricity consumption [2] - Domestic energy production has accelerated, with over 90% of the consumption increase being self-supplied, highlighting the significant role of renewable energy [2] Group 2: Investment Trends - Energy industry investment has shown robust growth, with annual investment exceeding 4 trillion, 5 trillion, and 6 trillion yuan, accounting for nearly 10% of total fixed asset investment [4] - The average annual growth rate of energy industrial investment has surpassed 16%, particularly in the electricity and heat production sectors, which have seen growth rates exceeding 20% [4] - Renewable energy investments are projected to account for over 80% of power investment in 2024, indicating a strong shift towards green energy [4] Group 3: New Energy Development - China's wind and solar power installed capacity increased from 530 million kilowatts in 2020 to 1.68 billion kilowatts by July 2023, with an annual growth rate of 28% [7] - The share of wind and solar power generation in total electricity consumption rose from 9.7% in 2020 to 18.6% in 2024, with a significant increase in the first half of 2023 [7] - China continues to lead globally in wind and solar power installations, with its combined capacity accounting for 47% of the world's total and 63% of new installations [7]

Group 1 - The company is currently valued at a historical low with a PB of 0.75, indicating strong safety margins [1] - The company has a low interest-bearing debt ratio of 6.3%, the lowest among the top eight state-owned construction enterprises, with cash assets of 39.7 billion yuan [1] - The company has consistently generated positive operating cash flow since its listing, with a total of 13.9 billion yuan in operating and investment cash flow over the past five years [1] Group 2 - The company's caprolactam project is progressing smoothly, benefiting from accelerated import substitution and declining raw material prices, which are expected to significantly enhance profitability [2] - The price of key raw materials for caprolactam, such as butadiene and natural gas, has decreased, leading to an estimated profit increase of 298 million yuan due to lower costs [2] - The company is focusing on a "technology + industry" integrated model, advancing several key pilot projects in new chemical materials and specialty chemicals [2] Group 3 - The domestic construction business is benefiting from accelerated investment in coal chemical projects, while overseas markets remain robust [3] - The company is expected to capture a significant share of the coal chemical investment, with projected annual investments of 117.7 billion yuan in 2025 and 210.4 billion yuan in 2026 [3] - The company signed overseas orders worth 113.3 billion yuan in 2024, continuing to grow from a high base last year, which will drive overall revenue and profit growth [3] Group 4 - The company is projected to achieve net profits of 5.7 billion yuan, 6.3 billion yuan, and 7.2 billion yuan from 2024 to 2026, with corresponding PE ratios of 7.9, 7.2, and 6.3 [4] - The company is recommended for investment due to the acceleration of overseas large orders, benefits from domestic coal chemical investment, and strong cash flow with potential for increased dividends [4]

Core Viewpoint - China's energy supply and demand structure is undergoing profound changes driven by carbon peak and carbon neutrality goals alongside high-quality economic development. Energy consumption is expected to continue rising, with a significant increase in the share of clean energy consumption by 2025 [1] Energy Consumption Analysis - Total energy consumption is projected to grow steadily, with a forecast of 61 to 62 billion tons of standard coal in 2025, reflecting a year-on-year growth rate of approximately 3% to 4%. Renewable energy consumption is expected to exceed 1.2 billion tons of standard coal, showcasing strong green growth momentum [1][2] - Coal consumption is anticipated to see slight growth, with raw coal consumption estimated at 4.8 to 4.9 billion tons in 2025, a year-on-year increase of 1% to 2%, while its share of total energy consumption will slightly decline [2] - Oil consumption is expected to stabilize, with crude oil consumption projected at 77 to 78 million tons in 2025, reflecting a year-on-year growth of about 1% [2] - Natural gas consumption is forecasted to grow steadily, reaching 450 to 460 billion cubic meters in 2024, with a year-on-year increase of approximately 6% to 7% [3] - Electricity consumption is expected to maintain rapid growth, with total electricity consumption projected to reach 10.4 to 10.5 trillion kilowatt-hours in 2025, reflecting a year-on-year growth of 5% to 7% [3] Energy Production Analysis - Total energy production is expected to reach 505 to 515 million tons of standard coal in 2025, with a slight slowdown in growth due to a high base from previous years. The share of non-fossil energy production is projected to rise to 22.3% to 23.0% [4] - Coal production is expected to remain stable at 4.8 to 4.88 billion tons in 2025, with a year-on-year increase of 1.5% to 2% [6] - Crude oil production is projected to reach 22 million tons in 2025, reflecting a year-on-year growth of about 2% [6] - Natural gas production is anticipated to enter a rapid development phase, with production expected to reach 250 to 260 billion cubic meters by 2025, reflecting a year-on-year growth of approximately 5% [7] Energy Supply and Demand Outlook - Energy consumption growth is expected to outpace production growth by about 0.5 percentage points, with an energy self-sufficiency rate maintained above 80%. Coal supply and demand are projected to remain stable, with coal imports expected to be between 500 to 550 million tons in 2025 [8] - The crude oil supply-demand gap is expected to exceed 50 million tons, with high levels of crude oil imports maintained. Natural gas imports are projected to have a demand gap of approximately 180 to 200 billion cubic meters [8] Recommendations - Strengthening energy security strategies and establishing a more robust energy reserve and emergency mechanism is recommended, along with enhancing collaboration with key energy supplier countries [9] - Continuous improvement of the share of electricity in final energy consumption and optimizing the power system's adjustment capacity to support the rational consumption of new energy is advised [9] - Attention should be paid to new business layouts and energy demands in areas such as artificial intelligence computing power and the new energy industry [9]

Investment Rating - The report gives a "Buy" rating for the company, marking its first coverage [4]. Core Views - The company is positioned as a leading comprehensive engineering firm in the chemical construction sector, with a robust growth trajectory supported by a solid order backlog and strategic partnerships [1][4]. - The company aims to leverage its strengths in coal chemical engineering and international markets to enhance its growth potential [2][3]. Summary by Sections Company Overview - The company, originally established as the Third Design Institute of the Ministry of Chemical Industry, has evolved into a leading comprehensive engineering company in China, focusing on technology-driven growth [1][14]. - The major shareholders include China Chemical and Shanxi Coal Group, which provide significant business synergies [1][19]. Business Segments - The company has a strong foothold in chemical engineering, with extensive experience in various sectors, including petrochemicals and environmental management [23]. - The engineering business remains the core revenue and profit source, while the environmental sector is gradually increasing its contribution [27]. Financial Performance - The company has demonstrated steady revenue growth, with a projected CAGR of 14% for revenue and 20% for net profit from 2020 to 2024 [1][37]. - The company reported a significant increase in new orders, with a total of 222.85 billion yuan in new contracts for 2024, reflecting a 24% year-on-year growth [50]. Market Opportunities - The coal chemical industry in Xinjiang is expected to see significant investment, with over 700 billion yuan in proposed projects, providing substantial order opportunities for the company [2]. - The company is actively expanding its international presence, with overseas orders reaching 53 billion yuan in 2023, marking a 177% increase year-on-year [3]. Investment Outlook - The company is expected to benefit from a strong order backlog, with orders amounting to approximately 498 billion yuan, which is 5.6 times its projected revenue for 2024 [50]. - The financial forecasts indicate a net profit of 500 million yuan in 2025 and 651 million yuan in 2026, with corresponding EPS of 0.71 yuan and 0.92 yuan per share [4].