The NDRC and NEA jointly announced a notice in regard to the rehabilitation and upgrading of coal-fired power plants nationwide. During the 14th Five-Year Plan period, the scale of power plant coal consumption reduction transformation will not be less than 350 GW. Meanwhile, flexibility transformation will be carried on 200 GW of existing coal fired power capacity during the period in order to promote clean energy consumption. Nationwide cumulative installed coal fired power capacity totaled approximately 1,140 GW as at the end of October 2021, which is set to drive up the demand for power plant engineering services over next decade in the domestic market.
The NEA officially issued the "Pumped Storage Project Mid- and Long-Term Development Plan (2021-2035)". According to this development plan, China’s total installed pumped storage hydro project capacity is set to increase from 32.5 GW as at the end of 2020 to 62 GW by 2025 and to approximately 120 GW by 2030 in a bid to increase the stability of power grids and to support the development of renewable energies in China. We expect that no less than RMB500 bn will be spent on pumped projects from 2021 to 2025, implying approximately RMB100 bn per year in pumped storage projects investment or RMB20 bn per year on hydro equipment demand.
We upgrade the investment rating to "Buy" and raise our TP to HK$4.88. We are optimistic about the outlook of Harbin Electric amid all the favorable policies recently issued by the government. Our EPS forecasts for the Company from 2021 to 2023 are RMB0.091, RMB0.243 and RMB0.363, respectively. Our new TP translates to 43.7x/ 16.5x/ 11.0x 2021-2023 PER or 0.4x/ 0.4x/ 0.4x 2021-2023 PBR, respectively.