China officially started construction on what will become the largest hydropower project in the world, which is located at the eastern edge the Tibetan plateau.
The Yarlung Zangbo Hydropower Project, spearheaded by Premier Li Qiang is projected to produce 300 billion kilowatt hours of electricity per year – three times the production of Three Gorges Dam.
The project, which is expected to cost 1.2 trillion Yuan ($167.8 billion), marks an important step forward in China’s infrastructure and energy transformation.
The dam’s size and complexity will have a significant impact on multiple industries, including construction materials.
Dongfang Electric, Xizang Tianlu and other companies are strategically positioned in order to take advantage of the increase in activity and orders tied to the development of the mega-dam.
Dongfeng Electric and China’s Mega-dam
Dongfang Electric is one of China’s top manufacturers of hydropower technology. It has emerged as the key player for the Yarlung Zangbo Project.
The company’s dominant share of 45% in the hydropower conventional market will allow it to capture a large portion (approximately 120 billion yuan) in contract equipment.
Citi’s Pierre Lau estimates that Dongfang can earn as much as 54 billion yuan through this initiative. This is equivalent to 77% of the company’s total revenues in 2024. However, revenue recognition could begin several years later.
It is not just the company’s market share that gives it a strategic edge, but its geographical footprint.
Dongfang has a hydropower production base and R&D center in Linzhi (Tibet), which allows it to customize equipment to the unique conditions of high-drop rivers that are found there.
Its proximity to the project and its technical capabilities make it an obvious choice for the demanding specifications.
Investor excitement has been rapid and intense. Dongfang shares listed in Shanghai hit the daily limit three times consecutively, and its Hong Kong shares surged by over 65% after the groundbreaking of this dam.
Macquarie Capital’s Albert Miao recently upgraded Dongfang’s target price, citing stronger-than-expected thermal power approvals and long-term build-outs through 2030. Dongfang Electric will benefit from a long-term demand, as dam construction is expected to last ten years.
What the megadam in China means to Xizang Tianlu
Xizang Tianlu is a regional supplier of cement with its entire production capacity based on Tibet. It’s uniquely positioned for the material needs associated with the Yarlung Zangbo Dam.
This project will consume more than 40 million cubic metres of concrete, which is approximately 16 million tonnes of cement per year.
Tianlu will be a primary supplier of this massive undertaking due to its logistical advantages and local presence.
Albert Miao, Macquarie analyst, highlighted Tianlu’s advantage over its competitors. He noted that other cement manufacturers derive only small amounts of revenue from Tibet.
Tianlu has a near monopoly in the cement market due to its geographic concentration, particularly as transporting it from other regions is expensive and regulated.
CGS International has also named Tianlu Dam as one of its major beneficiaries, confirming their status as the preferred concrete supplier for this dam.
Tianlu has a unique opportunity to grow its revenue over the long term, thanks to the size of the project.
Investor interest is expected to increase as the scope of the dam becomes more apparent.
Tianlu’s investment appeal may be further enhanced by Beijing’s recent efforts to curb aggressive pricing in the cement sector.
The Yarlung Zangbo Dam will reshape China’s energy landscape. It also offers a transformational opportunity to companies such as Dongfang Electric, and Xizang Tianlu, who are each poised for a key role in building and powering the future.
The two companies that will benefit most from the post-China megadam project are listed below. This list may change as new information becomes available.
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