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Dongfang Electric thermal power promising nuclear power go hand in hand

    Investment Tip: We maintain our rating recommendation Dongfang Electric, raised its target price to 40.1 million,battery clip corresponding to 18 times 2012 earnings. Our 2010 to 2011 the company increased net profit of 21-27% for the first time gives the 2012 forecast. Updated three-year earnings per share were 1.38,1.73 and 2.23 yuan, higher than the market consensus forecast of 18% to 29%.

    Rationale:tow rope We will Dongfang Electric from 2010 to 2011, thermal power equipment deliveries were increased 12% and 37% for the following reasons: 1) last year from 1 November, the National Thermal Power Unit by the number of hours increased by 5%, 2) over the same period the national thermal power equipment did not yield as we expected a decline,booster cables but increased by 2%, 3) overseas orders, orders rose sharply, particularly in India, accounting for thermal power end of last year 30% of orders in hand, and 4) the order in hand, looking from The company plans to deliver in 2011 a record high.

    We will Dongfang Electric 2010 to 2011 nuclear power equipment gross margin increased 5 percentage points for the following reasons: 1) the first three quarters of last year's gross profit margin of nuclear power has exceeded our expectations, rapid increase to 14%, and 2) trends in the localization of equipment increasingly apparent,ratchet tie dowm more and more of the original imported spare parts begin by domestic production, such as control systems, forging equipment, U-tube, power supply, valves, pumps and so on.

    We expect new orders last year, 500 billion, as at the end of last year, orders totaled 140 billion yuan in hand, a record, of which more than 40 billion nuclear power orders, accounting for 28%.

    Valuation and recommendation: The company now only 13.6 times 2012 earnings, well below the 25.7 times that of Shanghai Electric.

    Dongfang Electric's nuclear power business in view of the proportion is much higher than Shanghai Electric (from order to see the proportion, 28% Dongfang Electric, Shanghai Electric only 10%), we believe the valuation discount should not have DEC.

    Dongfang Electric nuclear power business in 2012 will contribute 0.89 yuan, to give 30 times the target price-earnings ratio, non-nuclear power business contributed 1.34, given 10 times the target price-earnings ratio, price target raised to 40.1 yuan.

    Risk: Macroeconomic hard landing for the thermal power will impact the future development of the business.

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