Global Nuclear Power Market Rapidly Expanding
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
The global nuclear power market is rapidly expanding alongside an emphasis on carbon neutrality and energy security goals. Doosan Energy boasts a successful track record in supplying core equipment to two countries at the forefront of these trends, Korea and the US. We continue to offer the firm as our top pick for the utility sector.
It is finally time to catch the big fish
Reiterating a Buy rating, we raise our TP on Doosan Enerbility to W20,000 (from W17,000), offering the firm as our sector top pick. Our key investment points include: 1) the expanding role of nuclear power as countries around the world focus upon achieving their carbon neutrality and energy security goals; 2) Doosan Enerbility’s successful track record in manufacturing core equipment for both Korea’s APR 1400 and the US’s AP 1000 3) the firm’s collaboration with NuScale on light water reactor type small modular reactors (SMRs). Of note, data we published on Oct 18 contained expectations for large-scale nuclear power plants in only Poland and the Czech Republic, but now it is being reported that this list may expand to include Saudi Arabia, the Netherlands, the UK, Finland, South Africa, Romania, and the Philippines. We also point out that Doosan Enerbility looks strongly situated to receive orders from Korea and the US.
Our TP hike stems from: 1) boosts in the estimated values for the firm’s nuclear power plant business (W3.0tn →W3.3tn) and its SMR arm (W1.8tn → W3.1tn) in light of anticipated higher orders at both domains; and 2) equity value estimate increases to W1.9tn (previous: W1.5tn) for affiliates Doosan Bobcat (51% stake) and W0.8tn (W0.6tn) for Doosan Fuel Cell (35%) in light of recent climbs in their share prices. Once anticipated mid/long-term expansion nuclear power plant orders begin in earnest (with accompanying higher orders), we will look at further boosting our TP. The non-consolidated earnings assumptions for our TP calculations currently include a 2023F EV/EBITDA of 30x, but this figure should drop to less than 17x after 2025 (when full-force earnings growth should start kicking in). In consolidated earnings terms, we see a 2023F EV/EBITDA of 11x and a P/E of 20x.
Domestic large-scale offshore wind turbine projects in which Doosan Enerbility is involved are to begin in earnest from 2023. Featuring long blade lengths, the firm’s wind turbine model is optimized for low-wind speed regions. We believe that success in these projects will help in the company in winning overseas contracts against its industry rivals. This positive should come gradually to be reflected in the company’s valuations, along with anticipated stronger presences in the global nuclear power and gas turbine markets.