CITIC SEC: Advanced nuclear reactors are expected to become a high-growth area. Positive outlook on the revaluation of the nuclear power sector.

CITIC SEC released a research report stating that the demand for AI is triggering a comprehensive revival of the global nuclear power industry, and domestic nuclear power has entered a peak period of normalization in terms of approval and construction. The overall valuation of the nuclear power industry is low. Against the background of the orderly development of conventional third-generation nuclear power, advanced reactors are the direction of high growth for nuclear power. Small reactors are expected to become one of the optimal solutions for data center energy supply and offshore power export, bringing about a revaluation of the nuclear power sector. CITIC SEC advises focusing on nuclear island equipment, valves, special materials, main pumps, and other material enterprises in terms of investment direction. CITIC SEC's main points are as follows: Advanced nuclear reactors refer to fourth-generation reactors and small modular reactors (SMR). According to the MIT Technology Review, advanced nuclear reactors are the core technological carriers for achieving the next generation of nuclear energy, usually referring to fourth-generation reactors and small modular reactors. SMRs have advantages such as fast construction, small investment, high safety, and flexible site selection. According to the International Energy Agency's forecast, SMR cumulative investment could reach $670 billion by 2050 under ideal conditions. Small reactors are one of the optimal solutions for data center energy supply and offshore power export. According to the definition on the International Atomic Energy Agency's official website, small reactors have an installed capacity of less than 300MW. According to IBM's official website, the power range of small reactors matches that of data centers. Small reactors can be manufactured in controlled factory environments and deployed within 12 to 24 months, significantly reducing capital risks. In addition, SMRs generally have refueling cycles of 5-10 years or more, are not constrained by fossil fuel transportation constraints, and are of great importance to some countries. SMRs have transitioned from anticipated themes to actual industrial progress. The firm believes that currently, policies are shifting from carbon neutrality narratives to narratives of energy security and computing power guarantee. Regulatory systems are starting to establish specialized channels for advanced reactors and SMRs. The first batch of demonstration projects is transitioning from paper to construction, cold testing, licensing, and construction. Government funds, technology giant funds, and industrial capital are starting to enter together, and the industry has made substantial progress. Catalyst factors should focus on "domestic first reactor milestone + overseas project progress/orders," and investment strategies should differentiate between light water reactors and fourth-generation SMRs. The firm believes that by mid-2026, power purchase agreements, permits, financing loops, and construction progress and customer conversion to hard contracts should be considered. For light water reactor SMRs, the firm believes that nuclear island main equipment, nuclear-grade valves, and special materials are important. For sodium-cooled fast reactors, main pumps, control rod drive mechanisms, sodium valves, heat exchangers, 316H/nuclear-grade sodium materials should be considered. High-temperature gas-cooled reactors should focus on main helium fans, hot gas ducts, and valves. Thorium-based molten salt reactors should focus on corrosion-resistant materials/containers/safety systems and so on. Risk factors: Risk of major safety accidents in the nuclear power sector; risk of construction delays in nuclear power projects; risk of significant fluctuations in raw material prices; risk of commercial development of advanced reactors falling short of expectations.