发帖
雷达卡
A decade of exceptional demand growth for the Chinese power equipment sector is coming to an end. While the dramatic growth in the wind and nuclear power equipment segments grabs the headlines, orders there are not likely to offset the impact of a structural decline in coal fired power equipment demand. A likely near term rebound in equipment orders after a 12-18 month hiatus should not obscure the fact that the long-term trend is towards slower growth. So while sector profits and business fundamentals should improve in the immediate future as equipment makers realize better pricing and enjoy a reprieve from high steel costs, our long-term view of the sector is negative. The structural growth slowdown has implications for sector valuations. The sector’s forward PE is unlikely to expand further and as the chart above shows, the rebound in orders in 2010-11 appears to already be largely priced in.
Shanghai Electric has the greatest upside against this backdrop with development of its nuclear and wind power technology still in its infancy and its non-power businesses on the cusp of recovery. For this reason, we believe Shanghai Electric’s order book and earnings should have the greatest upside.
The best quality company, with highest earnings growth and the greatest leverage to nuclear and wind power, is Dongfang Electric, but our valuation models suggest that the company is now trading above its fair price.
At the other end of the spectrum is Harbin Power, facing negative earnings growth after 2010 and with limited exposure to nuclear and wind. Harbin’s orders have lagged competitors in the last two years. Despite the unattractive fundamentals, Harbin’s underperformance has left the stock looking significantly undervalued .
China Power Equipment
INDEX
1. Sector Fundamentals
p4
2. Industry Outlook
P9
3. Earnings Outlook
p17
4. Sector Valuation
p20
5. Appendix I
p27
6. Appendix II
p32
COMPANY SECTIONS
Shanghai Electric
p41
Harbin Power
p59
Dongfang Electric
p78
京公网安备 11010802022788号
