Jiang home: Hydrogen energy industry policy reignites market attention, core companies listed in Hong Kong.

Hydrogen energy, a market topic that has once again attracted media attention, is because Shandong Province has issued a notice to exempt hydrogen vehicles from paying highway tolls on the province's highways equipped with ETC devices starting from March 1 for a trial period of two years. As a result, A-share related concepts were also being hyped up. Exempting highway tolls can significantly reduce TCO costs. For a 49-ton long-haul tractor, exempting highway tolls can reduce overall lifecycle costs by over 20%. Institutions calculate that assuming daily round trips between Qingdao and Jinan on the highway for 320 days, TCO costs can be reduced by around 2.4 million RMB, equivalent to the cost of purchasing nearly 2 heavy-duty trucks. In addition to this, Tianjin announced earlier the policy to exempt hydrogen fuel cell vehicles from highway tolls by 2022. If this policy can be promoted in more provinces nationwide, it can effectively promote the application of hydrogen fuel cell vehicles. Recently, local governments have introduced subsidies such as Inner Mongolia's loosening of green certificates and Shandong's waiver of highway tolls, similar to the policies in many provinces and cities in 2021. With 55 ministries issuing subsidies and the focus on industry development, this year may be a "from 0 to 1" subsidy and support year. By mid-2022, Shandong Province has established 23 hydrogen refueling stations with a daily hydrogen supply capacity of 10,000 kilograms; 1115 hydrogen fuel cell vehicles have been promoted for demonstration operations, with a total operating mileage of over 15 million kilometers. Shandong plans to have 100 hydrogen refueling stations and promote 10,000 fuel cell vehicles by 2025, and 200 hydrogen refueling stations and 50,000 fuel cell vehicles by 2030. Shandong is constructing hydrogen-fueled highways around the Jiqing Expressway and setting up hydrogen refueling stations at various service areas. During the "14th Five-Year Plan" period, Shandong Hi-speed Group will plan to build more than 8 hydrogen refueling stations on the Qingyin Expressway and Jiqing Central Line, connecting the hydrogen energy industry clusters centered around Qilu Petrochemical in Zibo, Jinan, and Binzhou, and the hydrogen energy industry clusters centered around Qingdao Refinery, Qingdao Academicians Port, Xihai New Area, and Weifang. Institutional analysis of the cost of hydrogen-powered heavy trucks suggests that the full lifecycle cost of diesel heavy trucks is around 4.2 million RMB, electric heavy trucks are around 3.7 million RMB, LNG heavy trucks are around 3-2.75 million RMB, hydrogen-powered heavy trucks are around 3.15 million RMB with subsidies, and 3.9 million RMB without subsidies. Considering the reduction in highway tolls (800,000-1 million RMB), the cost of hydrogen-powered heavy trucks without subsidies is slightly higher than LNG, but much lower than diesel and electric heavy trucks. Shandong has a total of 1.1 million heavy trucks, with a 10% penetration rate equivalent to 100,000 hydrogen-powered heavy trucks, far exceeding the growth rate of new energy vehicles in 2021. Considering the potential of the domestic and international markets, this is an achievable goal. In fact, the hydrogen energy policy benefits the Shandong region, with the most direct beneficiaries in the Hong Kong stock market being CIMC ENRIC (03899) and Weichai Power (02338). Especially, CIMC ENRIC's hydrogen equipment business has continued to grow rapidly, with sales of hydrogen storage and transportation equipment, onboard hydrogen storage cylinders, and hydrogen supply systems all on the rise. In the first three quarters of 2023, CIMC ENRIC's total revenue increased by 62.7% year-on-year to 440 million RMB, with its total revenue share rising by 0.7 percentage points year-on-year to 2.6%. The company has made breakthroughs in research and development, such as successfully launching a 90MPa hydrogen liquid-drive compressor, a 45MPa diaphragm compressor, the first 30MPa hydrogen gas bundling container in China, and the first low-temperature, water-free ammonia transport vehicle in China. In January 2024, CIMC ENRIC's LNG vehicle cylinder orders reached 165 million RMB, a 27-fold increase year-on-year. By the end of September 2023, the company's order backlog had increased by 27.6% year-on-year to 22.16 billion RMB, reaching a historical high, with the clean energy and hydrogen energy sectors increasing by 50.3% and 55.8% year-on-year to 15.51 billion RMB and 420 million RMB, respectively. JU Xiaofeng, Vice President and Head of the Energy Equipment and Engineering Business Center of CIMC ENRIC, stated that under the premise of "dual carbon" goals, the green transformation of the heavy truck industry is urgent. The widening price difference between oil and gas has injected strong growth momentum into the LNG heavy truck market. Currently, CIMC ENRIC's production enterprises have optimized their production lines, increased production capacity, and grasped the high-growth market opportunities to support the greenization of the heavy truck industry. Weichai Power's hydrogen-powered heavy trucks should be at the forefront in China. According to an investor relations activity report released by Weichai Power Co., Ltd. on February 19, 2023, due to the widening price difference between oil and gas, natural gas heavy trucks have economic advantages, with sales of natural gas heavy trucks exceeding 150,000 in 2023, reaching a penetration rate of over 20%. In the future, with natural gas prices stabilizing, improved infrastructure such as refueling stations, and the advancement of environmental policies, there is further development potential in the natural gas heavy truck and engine market. Disclaimer: This article is for discussion purposes only and should not be considered as investment advice. The author does not hold any of the above-mentioned Hong Kong stocks. The stock market carries risks, and investments should be made cautiously!