CITIC SEC: Accelerating domestic wind power tendering, industry prosperity reversal imminent.

CITIC SEC released a research report stating that in recent days, key offshore wind power projects such as Guangdong Fanshi One and Shandong Peninsula North L in China have accelerated bidding. Issues such as navigational channels and project approvals, which the market was previously concerned about, are expected to be gradually resolved. CITIC SEC predicts that domestic offshore wind power projects are expected to start construction before the end of the year, and by 2025, they may enter a stage of intensive installation, signaling a turnaround in the industry. They recommend high-quality domestic companies in the submarine cable, piling, casting and forging, and wind turbine sectors. Key points of CITIC SEC's views: Fanshi One initiated submarine cable bidding, and offshore wind power projects in Guangdong are expected to commence construction intensively. On September 12, according to information from the China General Nuclear Power electronic commerce platform, the bidding for the first batch of 500kV submarine cable and laying project at the Yangjiang Fanshi One offshore wind farm has been initiated, with plans to deliver the first batch by April 1, 2025. The Fanshi One project completed the bidding for wind turbines in 2022, but due to navigational channel issues, a change in land use was announced in June of this year. The initiation of submarine cable bidding for this project indicates that the related navigational channel issues have been gradually resolved. Combined with the initiation of wind turbine bidding for the Fanshi Two project in May and the acceptance of the environmental impact assessment for the submarine cable installation projects for the Qingzhou Five and Seven projects in the same sea area in August, we predict that the progress of offshore wind power projects in Guangdong will continue to accelerate, with conditions for commencement of construction likely to be met by the end of 2024 and entering a stage of intensive installation in 2025. The Shandong Guoguan sea area Huai L project initiated submarine cable bidding, and northern offshore wind projects are gradually moving towards deep-sea areas. On September 14, according to information from the State Power Investment Corporation electronic commerce platform, the pre-bidding for the submarine cable and ancillary equipment project for the Shandong Peninsula North L offshore wind farm, including 66kV and 220kV submarine cables, has been initiated, with a delivery period of approximately one year. This offshore wind project has a installed capacity of 504MW, a water depth of 51-53m, and a distance of about 57km from the coast, in a state-owned sea area. This marks that the approval and promotion process of state-owned sea area offshore wind projects has been basically straightened out, and the northern offshore wind projects are moving towards deep-sea areas at an accelerated pace. The domestic offshore wind power industry is expected to bottom out and rebound, with ample room for growth in deep-sea installation. With issues such as project approvals and navigational conflicts gradually being resolved, we expect that key offshore wind projects in provinces such as Guangdong will start construction intensively before the end of the year, driving a turnaround in the offshore wind industry. We estimate that the installed capacity of offshore wind power in China will reach approximately 7/15GW in 2024/25. In addition, coastal provinces and cities have recently started to release bidding projects for offshore wind power, actively promoting the progress of deep-sea offshore wind projects. We predict that the scale of deep-sea offshore wind projects that are expected to be implemented in China during the "15th Five-Year Plan" period will reach 120-150GW, which is 2-3 times the installation target of the "14th Five-Year Plan," indicating broad medium- to long-term growth potential. Risk factors: Wind power bidding and installation do not meet expectations, delays in the commencement of offshore wind projects, sharp increases in raw material costs, and delays in the delivery of wind turbine components due to inadequate supply of certain parts. Investment strategy: Against the backdrop of the acceleration of domestic offshore wind power project progress and the expected acceleration of demand release in the industrial chain, we suggest focusing on leading companies in various sectors of the offshore wind power industry that possess multiple advantages in technology, product quality, regional presence, and overseas markets. We specifically recommend companies in the submarine cable sector, piling sector, casting and forging sector, and wind turbine sector.