NARI-TECH(600406)2024-05-28 14:14Summary of Conference Call Notes Industry Overview - The conference focused on the electric power industry and the ongoing electricity market reform in China, emphasizing the establishment of a unified national market to accommodate a high proportion of renewable energy integration [1][6][7]. Key Points and Arguments 1. Electricity Market Reform Policies - The core idea of the electricity market reform is to establish a unified national market, emphasizing integration and flexibility to adapt to a high proportion of renewable energy [1][6]. - The share of electricity market transactions has increased from less than 17% in 2016 to over 60% currently, although the market remains fragmented and has not broken administrative boundaries [1][6]. - The reform's three development directions include regulating the middle, liberalizing both ends, and promoting the independent operation of educational institutions [1]. 2. New Technologies and Market Participants - The introduction of new technologies is crucial for the development of the electricity system, requiring market participants to facilitate technological advancement and support energy transition [2][7]. - New market participants include energy storage companies, virtual power plants, and composite aggregators, providing opportunities for equipment industry enterprises to engage in the supply chain [2]. 3. Development of Various Segments in the Electricity System - The generation side will transition to a real-time bidding model, focusing on power forecasting to adapt to a renewable energy-dominated system [3][8]. - The transmission and distribution sectors will emphasize flexibility and integration, utilizing advanced storage systems [3][10]. - The distribution network faces capacity bottlenecks and requires expansion to support a unified electricity market and promote distributed energy development [3][10]. 4. Investment Opportunities in Grid Equipment and Technology - There are new market directions for both primary and secondary equipment in the transmission and distribution sectors, particularly for secondary equipment to enhance system flexibility [4][11]. - Companies like TBEA, China XD Electric, and Golden Equipment excel in primary equipment, while State Grid NARI, Sifang Co., and others are significant in secondary equipment [4]. 5. Analysis of Guangxi Energy Company - Guangxi Energy has a business model linked to local economic growth and electricity demand, with a net profit of approximately 0.3 yuan per kWh sold [5][17]. - The company benefits from its grid resources, enhancing its profitability, and has quality assets that may be injected into the listed company, improving asset quality [5][16]. - The company’s annual electricity sales from the Hezhou grid are about 4.1 billion kWh, with 1.1 billion kWh from self-generated power [5][17]. 6. Trends and Opportunities in the Electricity Reform - The reform is expected to create significant construction demand across all segments of the electricity system, particularly in high equipment upgrades and new technology applications [11]. - The focus on smart meters, charging piles, and low-voltage electrical appliances will require substantial investment in hardware and software development [11]. 7. Profitability Analysis of Guangxi Energy - The company’s small hydropower business has a low development cost of about 0.1 yuan per kWh, allowing for profitable sales to downstream customers at higher prices [17]. - The company’s fire power business faced a loss of approximately 100 million yuan last year due to high coal costs, while its hydropower stations can yield significant profits in favorable conditions [18]. 8. Future Outlook - Guangxi Energy is expected to benefit from electricity price increases and the construction of the Haifeng platform, with strong recommendations for investment based on its grid assets and anticipated asset injections [5][16][18]. - The company’s stock is currently at a historical low, but recent electricity reform policies have driven stock price increases, with a 113% year-on-year growth in hydropower generation in the first quarter [18]. Other Important but Overlooked Content - The conference highlighted the importance of virtual power plants as a new area within the electricity reform, integrating existing resources to provide flexibility in the electricity market [9][12]. - The role of software and intelligent electrical terminals in the development of virtual power plants was emphasized, indicating a growing trend towards digitalization in the electricity sector [13].