CMSC: Nuclear power approval progress 25 years ahead and maintaining high approval volume for nuclear power investment value in the long term.

CMSC released a research report stating that recently, the State Council executive meeting approved 10 nuclear power plant projects, including the Zhejiang Sanmen Phase III Project, the Fujian Xiapu Pressurized Water Reactor, the Shandong Haiyang Phase III Project, the Guangdong Taishan Phase II Project, the Guangxi Fangchenggang Phase III Project, and 5 other nuclear power projects. This year, the approval progress of nuclear power plants has been advanced, and a high number of approvals have been maintained. Under policy support, it is expected that China's nuclear power will maintain an annual approval pace of 8-10 units for a period of time. Assuming an investment of 20 billion yuan for a single 1.2 million kilowatt unit, this will bring an annual average construction investment of 160-200 billion yuan. The entire nuclear power industry chain is expected to usher in a high prosperity cycle, and the long-term investment value of nuclear power is promising. Leading companies China National Nuclear Power (601985.SH) and CGN Power Co., Ltd. (003816.SZ) are recommended. The main points of the CMSC are as follows: On April 27th, the State Council executive meeting approved 10 nuclear power plant projects. Among them, China National Nuclear Power was approved for the Sanmen Nuclear Power Plant Units 5 and 6 project (21.215 million kilowatts), and CGN Power Co., Ltd. was approved for the Taishan Units 3 and 4 project (21.2 million kilowatts) and the Fangchenggang Units 5 and 6 project (21.208 million kilowatts). State Power Investment Corporation was approved for the Haiyang Units 5 and 6 project (21.3 million kilowatts), and China Huaneng Group was approved for the Xiapu Units 1 and 2 project (21.215 million kilowatts). Except for the Haiyang Units 5 and 6 which adopt the CAP1000 technology, the other units all use the Hualong One technology, marking a new rapid development period for China's nuclear power construction. In terms of approval time, China approved 3 and 2 nuclear power projects in April and September 2022, respectively; 3 and 2 nuclear power projects in August and December 2023, respectively; and a total of 5 nuclear power projects in August 2024. This year, the approval progress of nuclear power plants has been advanced, and a high number of approvals have been maintained, indicating a strengthening effort in policy support for the development of nuclear power. Nuclear power is clean, efficient, and both growth-oriented and stable. In terms of power generation stability, nuclear power serves as a base-load power source and is basically not involved in peak shaving and frequency regulation. It has high utilization hours, with China's average utilization hours for all power sources from 2013 to 2024 being 3442 hours, while nuclear power utilization hours are 7683 hours, significantly higher than the national average. In terms of electricity price mechanism, most nuclear power plants implement planned electricity prices, and some regions have excess profit recovery mechanisms. Therefore, although market transactions account for nearly half, the difference between market electricity settlement prices and planned electricity prices is not significant. Overall, nuclear power prices are relatively stable. In terms of cost structure, the operating costs of nuclear power plants mainly consist of depreciation and fuel costs. Nuclear power companies stabilize raw material procurement prices by signing long-term contracts, and fluctuations in uranium prices have a relatively small impact on costs. In 2019, China proposed actively developing nuclear power in a safe and orderly manner, and plans to add no fewer than 10 approved units each year from 2022 to 2025. According to the China Nuclear Energy Industry Association, by 2035, China's nuclear power generation capacity as a percentage of the total electricity generation will reach 10%. Currently, China's nuclear power generation capacity accounts for less than 5% of the total electricity generation, leaving significant room for growth. The scale of nuclear power plants under construction and in operation continues to grow, and nuclear power technology is leading. As of now, China has a total of 102 nuclear power units in operation, under construction, and approved for construction, with a total installed capacity of 113 million kilowatts. The total scale of nuclear power in China has for the first time surpassed that of other countries and is ranked first in the world. In 2024, nuclear power generation reached 444.7 billion kWh, a year-on-year increase of 3%, accounting for 4.72% of the total electricity generation. In terms of nuclear power technology, the "Hualong One" design has entered a large-scale construction phase, the "Guohe One" demonstration project's first reactor was completed and put into operation at the end of last year, the "Linglong One" completed the installation of its outer dome, the liquid fuel thorium-based molten salt experimental reactor achieved stable continuous operation, and China continues to make new breakthroughs in experimental fusion devices such as the China Circulating Tokamak, EAST, and HL-7. The industry has a wide moat and a stable duopoly position. Currently, only four companies in China, China National Nuclear Corporation, China General Nuclear Power Group, State Power Investment Corporation, and China Huaneng Group, hold nuclear power operation licenses, creating strong entry barriers for the industry. China National Nuclear Power and CGN Power Co., Ltd. dominate the industry, with China National Nuclear Power owning 25 nuclear power units in operation with an installed capacity of 23.75 million kilowatts and 18 units under construction or approved with an installed capacity of 20.641 million kilowatts. CGN Power Co., Ltd. manages 28 nuclear power units in operation with an installed capacity of 31.756 million kilowatts and 16 units under construction or approved with an installed capacity of 19.406 million kilowatts, maintaining a stable position in the industry. Continuing a high approval rate, the industry is poised for a high prosperity cycle. This year, with the approval progress of nuclear power plants being advanced and a high number of approvals being maintained, it is expected that China's nuclear power will maintain an annual approval pace of 8-10 units for a period of time under policy support. Assuming an investment of 20 billion yuan for a single 1.2 million kilowatt unit, this will bring an annual average construction investment of 160-200 billion yuan. The entire nuclear power industry chain is expected to usher in a high prosperity cycle, and the long-term investment value of nuclear power is promising. Leading companies China National Nuclear Power (601985.SH) and CGN Power Co., Ltd. (003816.SZ) are recommended. Risk Warning Risks include the safe and stable operation of nuclear power plants, projects not meeting expectations, and a downward risk in electricity prices.