Fangzheng Securities: China Power Investment Reform Enters Deepwater Zone to Seize Asset Securitization Dividends

The Zhitong Finance App learned that Fangzheng Securities released a research report saying that in response to the market performance of China Power Investment Group after the launch of its previous asset restructuring project, the bank believes that asset securitization expectations have had a significant effect on boosting stock prices. Considering that many listed companies within the group, such as Yuanda Environmental Protection (600292.SH), Power Investment Energy (002128.SZ), and Jidian Co., Ltd. (000875.SZ), and Jidian Co., Ltd. (000875.SZ), still have asset injections or mergers, acquisitions and restructuring expectations, the bank believes that the corresponding market value of these companies still has a lot of room to increase, and it is expected to drive the stock price to rise further in the future.

The main views of Fangzheng Securities are as follows:

China Power Investment plans to restructure the assets of its subsidiaries

Among them, its listed companies such as Shanghai Electric Power, Power Investment and Finance, and Yuanda Environmental Protection all have asset restructuring plans. The bank sorted out China Telecom Investment's assets and looked forward to future asset restructuring space. By the end of '24, the China Power Investment Corporation had an installed capacity of 83.53 million kilowatts of thermal power, 26.58 million kilowatts of hydropower, and was actively deploying nuclear power, as well as wind and light installations. The securitization ratio of electricity assets was about 51.4%. In addition to power assets, the Group also lays out the aluminum industry chain on a large scale, including bauxite, alumina, and electrolytic aluminum. At the end of 2024, it had production capacity of 11.2 million tons of bauxite, 3.9 million tons of alumina, and 4.3 million tons of electrolytic aluminum.

The securitization of the Group's assets has been accelerated across the board, and the value reshaping of listed platforms is imminent

Judging from the capital operation path, China Power Investment Group has experienced several rounds of large-scale strategic mergers and restructuring since its establishment. Overall, it has shown a clear path from horizontal mergers and restructuring, to the overall listing of financial assets, to the spin-off and integration of specialized businesses. In May 2015, China Power Investment Group and China Nuclear Power carried out the first major merger and restructuring since its establishment, which effectively promoted the improvement of China's third-generation nuclear power autonomous technology industry chain. In 2019, the Group officially launched the Yellow River project capital increase initiative to introduce a market mechanism to improve operational efficiency; in the same year, Dongfang Energy, a subsidiary of the Group, injected financial assets and changed its name to Electricity Investment and Finance in 2022, enabling the listing of some of the Group's financial assets.

The Group has broad scope for capitalization, and the overseas assets of hydro-nuclear aluminum are still expected to be further restructured and injected

On September 30, 2024, a listed company under the China Power Investment Corporation, Dentsu Ronghe Yuanda Environmental Protection announced plans for major asset restructuring. The former is expected to divest financial assets and install nuclear power assets, while the latter will transform into a hydropower asset integration platform to promote further securitization of nuclear power and hydropower.

Even if the Group plans to inject some of its nuclear power assets and hydropower assets into electricity production and environmental protection, the bank believes that China Power Investment Group still has a large number of assets such as water, nuclear, aluminum, and hydrogen that have not been listed, and there is plenty of room for long-term securities capitalization in the future. Among them, a large number of the Group's hydropower assets are located in the Yellow River Company. Combined with the successive injections of Yuanda's environmentally friendly hydropower assets, the bank speculates that this platform may become an injection platform for the Group's core hydropower assets. In addition, the Group has formed a complete aluminum industry chain, but currently only a small number of electrolytic aluminum assets are located in the listed company Power Investment Energy. Considering that Dentsu Energy announced in May this year that it plans to acquire 100% of Baiyinhua Coal and Electricity's shares, and that it has some electrolytic aluminum production capacity, the bank speculates that if the Group continues to promote mergers, acquisitions and restructuring of aluminum assets in the future, Power Investment Energy is expected to become a related asset integration platform. Meanwhile, the Group's listed companies such as Jidian Co., Ltd. and Shanghai Electric Power have all recently changed their names, and in line with the Group's position, the bank speculates that they will become the main platforms for injecting the Group's new energy assets and overseas assets, respectively.

Investment advice

It is recommended to focus on power investment and energy (the integrated profit of coal, electricity and aluminum, which is expected to become the Group's aluminum industry integration platform), Yuanda Environmental Protection (domestic hydropower asset integration platform, and the group still has unlisted hydropower assets to be injected), Shanghai Electric Power (undertaking the Group's internationalization platform, which is expected to become an integration platform for overseas assets), and Jidian Co., Ltd. (which is expected to become the Group's new energy asset integration platform).

Risk warning: Electricity demand falls short of expected risk; incoming water falls short of expected risk; risk of falling feed-in tariffs; risk of falling asset injection; risk of tightening energy consumption and environmental protection policies; risk of falling short of expected risk of commissioning projects under construction.