UHV construction once again reaches a peak of development

Reporter Zhou Yifan In the face of the epidemic, the market sentiment brought about by global panic is like a wild horse running wild. On March 13, A-shares fluctuated widely. The Shanghai Composite Index closed down 1.23% at 2887.43 points, once down more than 4%; the Shenzhen Component Index closed down 1% at 10831.13 points; the ChiNext Index fell 0.75% to 2030.58 points, once down more than 5%. However, on the other side of the general stock market crash, there are still "pressure-resistant experts" who are rising against the trend.

On March 13, the UHV sector was strong throughout the day, with a 3.31% increase at the midday close. After the afternoon opening, as the decline of the three major A-share indices narrowed rapidly, the UHV sector further strengthened, and rose 6.58% by the end of the day, ranking first in the market concept sector, and 20 of the 23 stocks turned positive. Among them, 11 stocks hit the daily limit, including TBEA (600089.SH), Tongguang Cable (300265.SZ), etc., and China XD Electric (601179.SH), Xuji Electric (000400.SZ), etc.

In fact, in the most severe month of the previous epidemic prevention and control, the cumulative increase of the UHV sector has reached 39.76%. As part of the new infrastructure, the market's expectations for UHV undoubtedly also reflect the new direction of economic development in 2020. In early March, State Grid issued the "Key Tasks of State Grid in 2020", which clearly planned to approve 7 UHV lines and start construction of at least 3 UHV lines in 2020. It is estimated that the investment scale of UHV in 2020-2021 will reach 65.6 billion yuan and 73.3 billion yuan respectively. Recently, State Grid has studied and compiled the "2020 UHV and Inter-provincial 500 kV and Above AC and DC Project Preliminary Work Plan", indicating that it will accelerate the approval and preliminary feasibility study of 5 AC and 5 DC UHV projects within the year.

"Ultra-high voltage construction has once again reached a peak of development, and has also brought new development opportunities and challenges to related equipment manufacturing companies. As demand grows, major equipment will generate market demand of more than 20 billion yuan," said relevant personnel from China XD Electric in an interview with an Economic Observer reporter on March 13.

Mao Weiming, chairman of State Grid Corporation of China, said that the company's UHV construction projects have a clear investment scale of 112.8 billion yuan for the whole year, which can drive social investment of 223.5 billion yuan, with an overall scale of nearly 500 billion yuan. He also revealed that at the beginning of the year, the company initially arranged for grid investment of more than 400 billion yuan, which can drive social investment of more than 800 billion yuan, with an overall scale of 1.2 trillion yuan.

Deep integration of manufacturing services

"The impact of this epidemic on the group company's UHV business is mainly reflected in the impact of personnel, materials, logistics, etc. on UHV project construction, which may cause problems such as extended construction period and increased construction costs." China XD said, "But whether it is a power grid company or an equipment manufacturing company, upstream and downstream have achieved orderly resumption of work and production, and effectively guaranteed the resumption of construction of key projects. For example, the Wudongde project, the northern Shaanxi-Wuhan project, the Qinghai-Henan project, the Zhangbei-Xiong'an project, etc. have all resumed work on site in mid- and late February. Overall, the impact of the epidemic on enterprises is limited. Enterprises can fully ensure product performance and project delivery through reasonable production scheduling, time saving and progress."

As a representative enterprise in the domestic power transmission and distribution equipment manufacturing industry, China XD Group's leading products include high-voltage switches, transformers, reactors, power capacitors, mutual inductors, DC transmission valves, etc. with voltage levels of 110kV and above. The company has provided complete sets of power transmission and distribution equipment and services for many of the first AC and DC transmission projects in China, as well as national key projects such as the "Three Gorges Project", "West-to-East Power Transmission", and ultra-UHV AC and DC. For the current UHV business, the company focuses on "intelligent" manufacturing.

China XD told reporters that the two national-level intelligent projects (switches and transformers) undertaken by the company have reached the international leading level. By replacing the heart, upgrading the nervous system and the brain, the old production lines have been upgraded and intelligentized. "Facing the trend of manufacturing from digitalization and networking to intelligence, the 'factory brain' will be the core of our future. Through data rebirth, we will create flexible production capacity, smart production organization, and continuous flow production, and transform industrial information technology into the new core competitiveness of enterprises." He emphasized.

At the same time, the deep integration of advanced manufacturing and modern service industries is also the industry direction identified by the company. "By accelerating the development of modern service industries such as system solution services, engineering general contracting services, integrated energy services, R&D design services, and technology finance, we will transform from an equipment manufacturer to a system integration service provider and create new core competitive advantages. In the process of building a world-class smart electrical system service provider, we will develop into a smart energy service provider." China XD said.

According to China XD, in recent years, the company has actively participated in the construction of the "Belt and Road" initiative, and has carried out investment and cooperation in countries such as Egypt, Indonesia, Malaysia, Russia, and Croatia through joint ventures, cooperative production, and other means.

According to the actual conditions and characteristics of overseas markets, the company flexibly adopts various methods such as investment, engineering general contracting, and technical cooperation, and explores the joint use of BOT, PPP and other methods with the local government, enterprises and domestic central enterprises to participate in the investment, construction and operation of relevant national power grid projects, wind power and solar photovoltaic projects. It drives the export of power transmission and transformation equipment through industrial going global, and strives to upgrade China XD Group's overseas business from mainly equipment exports to a combination of equipment, services, technology and capital exports, and promotes the transformation of competitive advantages from mainly price advantages to comprehensive competitive advantages with technology, brand, quality and service as the core.

Surprises and challenges

In the plan proposed by the State Grid, it is expected that in 2020, the approval of 2 direct and 5 alternating UHV projects will be accelerated, namely: Baihetan-Zhejiang, Baihetan-Jiangsu, Nanyang-Jingmen-Changsha, Nanchang-Changsha, Jingmen-Wuhan, Zhumadian-Wuhan, Wuhan-Nanchang. In this regard, Dongwu Securities said that in terms of UHV DC, the two "Baihetan-Jiangsu" and "Baihetan-Zhejiang" projects that have not yet been approved among the five DC lines accelerated in September 2018 are planned to be approved in June and December this year respectively. The dynamic investment of the two lines is 30.7 billion/27 billion respectively, which will bring 8-8.5 billion orders for main equipment, which will be confirmed in 20-22 years, which is in line with expectations.

As for the three new UHV DC projects of State Grid, the market generally believes that they have exceeded expectations. CICC said that the three new UHV DC lines, including the Jinshang Hydropower Transmission Project, Longdong-Shandong Project, and Hami-Chongqing Project, are planned to be completed in June. The feasibility study will be completed in June and the integrated bidding for feasibility study and design will be launched after being included in the national power plan. The investment amount of UHV DC projects is large, and it is expected to drive about 98.4 billion yuan of dynamic investment and 25 billion yuan of equipment investment.

Huatai Securities pointed out that under the current environment, in the short term, attention can be paid to the performance increase brought by the accelerated pace of UHV construction, and in the long term, attention can be paid to the possibility of exceeding expectations in the 14th Five-Year Plan driven by new infrastructure. Grid investment is upward, following policy guidance, and State Grid is fully promoting counter-cyclical investment under economic pressure. The positioning of the grid is clearer, based on long-term clean energy consumption, and the planning of new lines under counter-cyclical adjustment is likely to exceed expectations.

Du Zhijun, director of research at Rongshu Investment, is optimistic about the investment direction under the wave of science and technology. "New infrastructure, including UHV and 5G, are new technology industries that we are optimistic about. They are the underlying supporting industries for the development of my country's new economy. The country will focus on supporting and investing in these areas. At present, new infrastructure accounts for about 10-15% of total infrastructure investment, and there is still a lot of room for future development."

Huatai Securities also stated that the preliminary work schedule of the State Grid's key power grid projects further refined the State Grid's work plan, and the time rhythm remained consistent. The UHV construction lines currently under construction are projects announced by the Energy Bureau in 2018. After rapid advancement, the construction pace of existing lines is expected to accelerate. It is expected that 2020-2021 may be the peak of UHV performance release, and UHV main equipment manufacturers will directly benefit.