Fu Neng Shares (600483): Fujian Wind Power Business Leader, The Turning Point Of Performance Is Approaching.

Company profile: Fujian wind power operation leader, 2018 performance is expected to increase significantly.

The company is the leader of wind power operation in Fujian province. Since the completion of asset restructuring in 2014, it has held three consecutive years of wind power installed capacity (2015-2017), ranking first in Fujian province.

By the second half of 2017, Fujian province has again raised the benchmark price of coal-fired power grids and the temporary electricity price of electricity and electricity, and the achievement of its six power plants, and contributed to the substantial increase in the heating capacity of longan thermoelectric Co., Ltd. in 2017. Its profitability continued to be high, and the share investment contributed by the company rose significantly by four factors. In 2018, the net profit of the parent company in 2018 is expected to increase significantly.

Wind power business: the certainty of offshore wind power installed capacity, optimistic about the sustainability of high profitability.

In terms of installed capacity, according to the Fujian offshore wind power project planning report, by the end of 2020, the offshore wind power installed in the province will reach more than 2 million kilowatts, and will reach more than 3 million kilowatts in 2030.

By the end of 2018, the installed capacity of the company's offshore wind power was approved to be 898 thousand kilowatts, and the reserve was 2 million kilowatts. The installed capacity of the single project was above 200MW.

Under the background of the certainty of offshore wind power projects in Fujian Province, the installed capacity of offshore wind power is expected to become the main growth point of wind power installed capacity in the future.

In terms of Internet prices, the company's existing wind power projects are located in the category IV resource area, enjoying the highest Internet benchmark price.

In December 2016, the NDRC proposed reducing the price of onshore wind power and the price of offshore wind power.

At present, the offshore wind power installed capacity of the company is larger and will not be affected by the electricity price reduction. The land based wind power project has basically started at the end of 2019, and it can enjoy the benchmark electricity price of 0.6 yuan / kWh.

From a medium to long term perspective, iron and steel effective capacity is expected to keep pace with demand, and the supply and demand structure tends to be more relaxed. The price of steel is expected to continue downward. It is expected to reduce the manufacturing cost of wind turbines in the future and drive down the marginal cost of wind power, and the profitability of the company's wind power business is expected to further improve.

Thermal power business: the price of coal is expected to go down, and we expect the "bath to regenerate".

The company's heat and power cogeneration business has been carrying out the principle of "heating fixed electricity" and electricity trading policy in recent years. The power generation hours are far higher than the national average level (nearly three years ahead of 900H). The high utilization hours make the thermoelectric power in the adverse situation of high coal prices high and maintain a relatively high profit level.

The 2017-2018 year is not only a downturn in the thermal power business of the company (gross profit margin continues to decline), but also a dark period for the entire thermal power industry.

But looking forward to the future, with the gradual decline of the price of the central coal, the limited space of natural gas prices and the toughness of thermal power demand, the thermal power business of the company is expected to "return to life", and the profitability is expected to pick up gradually, and the turning point of the performance is not far away.

Heating business: the advantages of combined heat and power production and continuous improvement of profitability.

The company's heat and power cogeneration business has always maintained the leading position in the heating market of Fujian Industrial Park, and the scale of heating and heating capacity ranked first in the province.

From the data of business in recent years, the company's heating price is linked with the price of raw materials, but its bargaining power is even more excellent. The longan thermoelectric heating price, which was put into operation in 2017, has a large advantage, making the business profitability continuously improving.

As a heating supply in the province, we are optimistic that the company will further enhance the regional coverage of thermal products and the market share of heating, and further enhance its bargaining power.

Taking into account the expected downward trend in coal prices, we believe that the profitability of the company's heating business is expected to continue to improve.

Textile business: the machine weaving industry has become the Red Sea, and the pformation and upgrading is worth looking forward to.

In recent years, the weaving industry (especially machine woven fabrics) has been facing the situation of homogenization competition caused by market shrinkage and overcapacity. The competition is becoming increasingly fierce, resulting in a downward trend in the sales prices of various products, and the profitability of business is also declining year by year.

With the enhancement of domestic awareness of environmental protection, the development of the health care industry, the growth of new industries and the construction of "one belt and one road", there is a new development space for the industry textile industry. The textile business has been upgrading to these blue ocean areas in recent years, and it is expected to further improve the market share, enhance the application ability of products in the high and new technology field, and form a new profit growth point of the company.

Investment strategy: we expect that in the future, as the company's offshore wind power installed capacity is determined and its business profit is expected to continue, the thermal power business will usher in a turning point of performance and the profitability of the heating business is expected to further improve, and the company's performance is expected to continue to increase significantly.

We estimate that the 2018-2020 year EPS of the company is 0.81, 1.04 and 1.27 yuan respectively.

Risk warning: economic growth is slower than expected; policy control is too strong; renewable energy substitution.