Dongfang Electric Signs Billion Dollar Bills in India

When the stock price of Dongfang Electric was suppressed due to the nuclear leakage incident in Japan, good news came out of overseas markets. The relevant person in charge of the Consulate General of India in Guangzhou recently revealed to Southern Reporters that Dongfang Electric has signed a large multi-billion-dollar order with India. Institutional sources believe that overseas orders will become an important performance support for Dongfang Electric.

India's thermal power market has become a strong support

In the previous day's "India Investment Opportunities Referral Media Briefing", the relevant person in charge of the Indian Consulate General in Guangzhou told reporters that the trade volume between Guangdong and India has reached 25% of the trade volume between China and India. The Indian Consulate General in Guangzhou will co-host the "India Investment Opportunities Referral Meeting" with the Guangdong Foreign Economic and Trade Department at the end of this month. The person in charge said that Dongfang Electric has signed a large number of billions of orders in India, and the Indian government is very welcome to Chinese companies investing in India and allows them to enjoy all other foreign preferential and convenient policies.

As early as the end of 2008, Dongfang Electric established a subsidiary in Calcutta, India. At the end of last year, Dongfang Electric announced that the company had signed a $2.5 billion coal-fired power plant project contract with India and involved 10 sets of 660MW supercritical coal-fired power plant units.

For Dongfang Electric, which has been traumatized by nuclear power, the Indian market, dominated by thermal power, will undoubtedly become an important "compensation."

“Dongfang Electric has sufficient orders and the overseas market is vast.” Hua Li Securities analyst Gao Li said that thermal power enters the peak period of delivery, overseas orders gradually increase, especially India and Southeast Asia have a rapid development momentum, and the Indian market has 200 million kilowatts in the next 7 years. About the market capacity, Chinese companies have obvious cost advantages and occupy more market share. Benefited from the scale of production and raw material prices, the level of gross margin of thermal power has increased.

According to calculations by Guojin Securities, Dongfang Electric currently orders about 150 billion yuan, of which nuclear power is about 40 billion yuan. According to the delivery process, the total sales revenue of nuclear power in 2011 is expected to reach about 10 billion yuan. The company’s mid-year report showed that its nuclear power income was only 1.461 billion yuan at the time, which was 8.64% of the total revenue. It has grown significantly over the past year or so.

Major shareholder recently increased holdings

Oriental Electric Group, the controlling shareholder of Dongfang Electric, recently increased its holdings twice. On March 15, the Group increased its holdings of 833,000 shares in the secondary market, which represented 0.042% of the number of shares outstanding. Calculated on the average price of 30.01 yuan a day, the company spent about 25 million yuan. This is not the first time that the Dongfang Electric Group has shot. On December 1st last year, it had increased its holding of 6.1 million shares in the A-share market and announced that it will increase its holdings (including the shares that have been increased) within the next 12 months to no more than the shares it has issued. Count 2% of company shares.

Influenced by Japan's nuclear leakage, the stock price of Dongfang Electric once fell sharply. Is this holding at this delicate moment? The relevant person of the Dongfang Electric Group denied this claim and stated that the increase in shareholding is part of the Group's plan. It has nothing to do with the earthquake in Japan. The election has only been increased because the price is reasonable.

However, there are disagreements on the valuation of Dongfang Electric. Deutsche Bank said that Japan’s nuclear accidents will make China’s nuclear power development more careful, but it will not stop; it will have no impact on the 2011-13 earnings analysis; power equipment makers can still benefit from non-nuclear power capacity growth; and nuclear power accounted for 2012 per share. With a 25% profit measurement, valuation losses are close to full provision, which is not possible. Dongfang Electric's rating rose from "sell" to "buy" and its target price was raised from RMB 30.3 to RMB 32. Citigroup estimated that Dongfang Electric's gross profit margin for nuclear equipment sales in fiscal year 2011 was 27%. Therefore, the bank adopted a conservative attitude and based on the worst case, lowered Dongfang Electric’s target price to HK$34.50 accordingly.