Waste incineration power generation has sprung up everywhere, and new energy vehicles are the best means to regulate energy structure.
Editor’s note: This article comes from WeChat public number “Guotai Junan Securities Research” (ID: gtjaresearch), author of the Junjun Research Product Center. The original title is “The Seven Teams of Guotai Junan Interpret the Investment Opportunities of the Energy Industry Chain in 2020 | Guojun Research”
China has become the world’s largest energy consumer.
According to the World Energy Statistics Yearbook published by British BP, in 2018, China’s energy consumption accounted for a quarter of the global total, an increase of one-third.
Although it is not a “sexy” new Internet economy, it is not a well-known consumer goods industry, but energy-related industries are undoubtedly the lifeblood of the country and one of the most important industrial chains of the real economy.
Data Source: Guotai Junan Securities Research. Technical support: HANABI.
So, what investment opportunities will the energy industry chain have in 2020?
The seven major industry teams related to the energy industry chain of Guotai Junan Research Institute have released their annual strategy reports in the near future. We will integrate them and share them with Jun.
There are some revolutionary reforms in the coal industry, as well as the self-reliance of natural gas and oil, as well as the resurgence of clean energy such as photovoltaics and wind energy, and the emergence of new areas such as waste incineration and power generation.
A more detailed information on the Guotai Junan Energy Industry Chain Annual Strategy Report can be obtained by clicking on the small program link in each section of the article.
01 A preliminary study on China’s energy pattern in 2020
In 2020, coal in China’s primary energy structure will account for 57% of the total, still the main energy supply.
▼ Coal still occupies the bulk of China’s energy consumption structure (billion tons of oil equivalent)
Source: ExxonMobil, Guotai Junan Securities Research
In 2020, China’s energy primary structure, oil and natural gas consumption growth was strong, accounting for 19% and 9% respectively, but import dependence continued to climb.
China is the world’s largest oil and gas importer. In 2018, it imported 460 million tons of oil, and its dependence on foreign countries reached 72%, the highest in the past 50 years; the dependence on natural gas was 43%.
China’s concerns about energy security risks continue to rise.
▼ China’s crude oil dependence on foreign countries
Data Source: Company Announcement, National Bureau of Statistics, Guotai Junan Securities Research
▼ China’s natural gas dependence is increasing
Data Source: Company Announcement, National Bureau of Statistics, Guotai Junan Securities Research
The proportion of renewable energy is increasing, with photovoltaics and wind power becoming the two pillars.
According to BP statistics, China became the largest contributor to renewable energy growth in 2018 (32 million tons of oil equivalent), exceeding the sum of OECD increments (26 million tons of oil equivalent).
▼ Renewable energy accounts for 70% of new power generation
Data Source: IRENA, Guotai Junan Securities Research
02 Coal Power,Steady Transformation
On January 12, 2019, after a major accident at the Lijiagou Coal Mine in Shenmu City, Shaanxi Province, the nationwide coal mine safety inspection was carried out to accelerate the exposure of some hidden coal mines.
For now, the number of small-scale mines in the country still accounts for a large number.
1. There are 3,113 small coal mines with an annual output of less than 300,000 tons, accounting for 53% of the country’s total, and the production capacity accounts for 8.9% of the country.
2. In particular, there are 1344 small coal mines with a capacity of less than 90,000 tons, accounting for 22.9% of the total, and the production capacity is 1.7%.
▼The proportion of small-scale mines in the country is still relatively large (2018)
Source: wind, coal supervision bureau, Guotai Junan Securities Research
In 2019, the state once again put forward the “Working Points for Coal to Resolve Excess Capacity in 2019” and the “Work Plan for Disaggregation and Disposal of Coal Mines of 300,000 tons/year”, requiring the supply-side reform to continue to deepen.
▼The reform task is overfulfilled two years ahead
Source: wind, government website, Guotai Junan Securities Research
As of July 2019, the localities are withdrawing from 390 coal mines with a production capacity of 80 million tons per year.
With the reform of coal mines and the replenishment of new energy sources, the growth rate of thermal power generation has also entered the downtrend as scheduled.
▼The growth rate of thermal power generation starts to decline
Source: wind, Guotai Junan Securities Research
Looking into the future, the industry’s supply and demand easing trend is gradually emerging, and the cost increase is accelerated, but the period is basically stable, and the operating cash flow is increasing steadily.The negative expansion of the scale of long-term and fund-raising cash flow will push the industry’s asset structure and financial expenses to continue to decline. The dividend brought by the reduction of the VAT rate has begun to appear and will continue in the future.
In the future, the industry will continue to “improve”, but “differentiation” will also become the key word. Large coal enterprises have the dual advantages of cost control and market at the top of the cycle.
03 Imported oil,“Black Swan” frequently
September 14, 2019, dozens of drones attacked two oil facilities in Saudi Aramco, the world’s largest oil company, and triggered a raging fire.
▼ Saudi crude oil facility attack site
Source: PhilipVerleger, Longzhong Petrochemical, Guotai Junan Securities Research
Crude oil is a tightly balanced commodity, and a 2-3% imbalance between supply and demand can trigger huge fluctuations in crude oil prices. As evidence, after the outbreak of the raid, crude oil prices soared 10%.
Despite Saudi Arabia’s announcement of a resumption of oil supply a week later, it is a longer-term thinking for the countries – geopolitical risks in the Middle East still exist, and the risk premium may rise in the trading ratio in the event of a crude oil outage.
According to the data, 15% of China’s imported crude oil in the first half of 2019 came from Saudi Arabia.
▼2019 H1 China imports Saudi crude oil accounted for 15%
Data Source: General Administration of Customs, Guotai Junan Securities Research
The long-term continuation of Sunni and Shiite sects in the Middle East may be a trigger for geopolitical risks, and domestic oil autonomy has also been placed on a more important position.
In order to further ensure the independent safety of oil, the National Energy Administration requires oil companies to complete the 2019-2025 seven-year action plan.
The current three barrels of oil have been submitted to their seven-year plan. According to Zhonghai