CITIC SEC: Supply Shock Affects Nuclear Power Prices, Downward Period of Nuclear Power Asset Returns Still Competitive

CITIC SEC released a research report stating that nuclear power prices have been impacted by the surge in thermal power supply in coastal provinces and cities. The bank has adjusted its forecast for the on-grid electricity prices of China National Nuclear Power and CGN Power Co., Ltd. for the years 2024 to 2026, lowering them by 0% to 2% and 2% to 4% respectively. Based on historical experience and the fact that nuclear power prices in 2025 are already close to the bottom of historical price fluctuations after the price cut, the bank predicts that the comprehensive electricity price of nuclear power will stabilize in 2026. Nuclear projects have shown strong resilience in terms of returns during historical price decline cycles, and the return on nuclear assets in the downward phase can still be maintained at a high level. Key points from CITIC SEC: Supply shock waves affecting nuclear power lead to price cuts. From 2025 to 2026, coastal provinces and cities will face supply shocks caused by the intensive commissioning of thermal power plants, which may lead to a certain decrease in the comprehensive on-grid electricity prices of nuclear power companies due to market price declines and adjustments in some provincial nuclear power market mechanisms. To reflect changes in the external market environment, the bank has respectively assumed average on-grid electricity price cuts of 0%/2%/2% and 2%/4%/3% for China National Nuclear Power and CGN Power Co., Ltd. from 2024 to 2026. Prices may stabilize in 2026, and asset returns in the downward phase remain competitive. The bank believes that the current market price decline is driven by market supply and demand, and the intensity of the price cuts may be weaker than in the previous round dominated by government administrative intervention. Due to the price cuts, the on-grid electricity price of nuclear power companies in 2025 is approaching the low point of the previous price decline cycle. Therefore, the bank expects the on-grid electricity price of nuclear power companies to stabilize in 2026. Shareholder returns from nuclear power projects are generally high and resilient during periods of declining electricity prices, with the net asset return rate of mature nuclear power projects still exceeding 15% under extreme conditions, and the nuclear power industry can still maintain high-quality operations during a downward cycle. CGN Power Co., Ltd. (003816.SZ): Increased contribution from new units, steady progress in project development. China National Nuclear Power (601985.SH): Implementation of targeted additional issuance will help growth, and capacity expansion enters an expansion cycle. Risk factors: Significant decline in electricity demand; Unexpectedly sharp decline in market electricity prices; Slowdown in nuclear power approval process; Significant increase in project costs; Significant rise in fuel costs, etc.