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【名称及出版时间】： China Power Equipment Producers - Expect more upside from nuclear & overseas orders - 2010.11.2.
【来源】：JPMorgan
【文件格式】： pdf
【页数】：21
【目录或简介】：
Strong share price rally supported by nuclear theme: Share prices
of China power equipment producers have outperformed the market by
40-70% over the past six months on the back of (1) better-than-
expected nuclear revenues and margins, and (2) recent market
preference for high-beta names. We expect solid valuation support
going forward as the market continues to perceive the sector as the
proxy for China nuclear power. Specifically, our recent analysis
indicates more room for upside from nuclear, as total nuclear orders
awarded to the three equipment producers so far represent only (a) 68-
85% of total estimated nuclear capacity under construction, and (b) 52-
65% of total estimated nuclear capacity approved by the NDRC. In this
respect, Shanghai should benefit the most among its peers as it (1) has
the largest nuclear order backlog as at 3Q 2010, and (2) can produce its
own casting and forged nuclear equipment parts.
• Other recent positives in the sector include (A) higher-than-expected
coal-fired orders from India (Shanghai to supply to Reliance; Harbin to
Lanco), and (B) announcement of off-shore wind projects in Jiangsu
(SHE/CHST winners), which protect quality wind equipment players
(SHE/CHST) from lower entry barriers in the on-shore wind market.
• Rating, estimate and PT changes: We raise 2010-13E earnings and
roll over our PTs from Dec10 to Dec11 (Table 12) in light of the
above. We upgrade Shanghai (geared nuclear play) from N to OW and
downgrade Dongfang (stretched valuation) from OW to N.
• CHST/Shanghai our top picks: Shanghai is our top pick from a 3-to-
6-month perspective, as we expect more positive news flow from
nuclear (geared play), overseas orders from India and off-shore wind
projects. From a 6-to-12-month perspective, CHST is our top pick as it
trades at a significant discount (11x 2011E P/E) to its peers (14-24x
2011E P/E) and has better LT growth prospects (no coal-fired exposure
+ potential upside from high-speed train/metro-railcar gearboxes).
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