Zhejiang Merchants Securities: The application of nuclear technology has a wide range of downstream applications and huge growth potential

According to the Zheshang Securities research report, driven by policy, the nuclear technology application industry is expected to experience rapid development. Non-power nuclear technology applications play an irreplaceable role in various fields such as industry, agriculture, healthcare, and public safety, with enormous growth potential. Currently, the continuous improvement of various links in the industry and the widespread downstream applications are making the nuclear technology application industry a new engine for national economic development, especially as the importance of nuclear technology applications becomes increasingly prominent in the process of accelerating localization in key areas.

Main points from Zheshang Securities:

Non-power nuclear technology applications: The "unsung hero" benefiting the public

1. Nuclear technology applications generally refer to non-power civilian nuclear technology, covering multiple industries such as industry, agriculture, healthcare, and public safety, playing an important role in national defense construction and the national economy. The International Atomic Energy Agency (IAEA) points out that "in terms of the breadth of applications, only modern electronics and information technology (ICT) can be compared with isotope and radiation technology."

2. In 2022, the output value of non-power nuclear technology applications in China accounted for approximately 0.57% of GDP, indicating significant growth potential compared to developed countries overseas (GDP share of 2-3%).

3. With the introduction of top-level design, on October 31, 2024, the National Atomic Energy Agency and twelve other departments jointly issued the "Three-Year Action Plan for the High-Quality Development of the Nuclear Technology Application Industry (2024-2026)," marking the first time in history that a top-level design specifically targeting the "nuclear technology application" industry has been implemented. It aims for the annual direct economic output value of China's nuclear technology application industry to reach 400 billion yuan by 2026, while providing clear guidance on isotope supply, application industrialization, industrial clusters, and leading enterprises.

Continuous improvement of various links in the industry, the timing for midstream and upstream layout is right

1) Accelerators: Electron accelerators are the core devices of nuclear technology applications, converting the potential energy of electrons into kinetic energy to provide high-energy particle beams or radiation.

2) Irradiation processing: Irradiation processing technology is mainly applied in scenarios such as irradiation sterilization, inspection and quarantine, and material modification. According to statistics, by the end of 2023, the scale of China's radiation processing industry is expected to exceed 200 billion yuan.

3) Isotopes: Isotopes have wide applications in medicine, industry, agriculture, radioactive drug science, industrial applications, environmental tracking, and biological research. Currently, the preparation methods for artificial radioactive isotopes mainly include production in nuclear reactors, preparation using charged particle accelerators, and separation and extraction from nuclear fuel reprocessing liquids.

Extensive downstream applications, accelerating localization in key areas

1) Industrial field: Irradiation material modification is the most industrialized application of radiation technology in China. With the increasing performance requirements for wires and cables in microelectronics, home appliances, automobiles, aviation, communications, and power systems, the demand for irradiated cross-linked wires and cables is rapidly growing, with production capacity expected to exceed 10 billion yuan by the end of 2023. Among them, nuclear-grade cable materials have more stringent performance requirements, and the entry barriers for related nuclear technology application suppliers are relatively high. With the advancement of the localization and independent design of cables for nuclear power plants in China, companies with relevant technical accumulation and supply licenses are expected to benefit first 2) Medical Health: Nuclear medicine is a discipline that involves the application of nuclear technology in medicine and its related theoretical research. It can be divided into experimental nuclear medicine and clinical nuclear medicine based on its application scope and focus. Currently, the use of radioactive nuclides or nuclear radiation for disease diagnosis, treatment, and medical research has become an important part of the medical field. However, key aspects such as medical isotopes and nuclear medical equipment in China still rely on imports. With the continuous efforts of the Chinese government, investment institutions, and research institutions in key elements or equipment such as nuclear medicine and proton therapy systems, the localization of China's nuclear medical industry is rapidly advancing.

3) Agricultural Environmental Protection: The application of nuclear technology in the agricultural sector mainly focuses on animal production and health, food safety and control, plant mutation breeding and genetics, soil and water management and agricultural environment, pest control, etc., thereby promoting food security and sustainable agricultural development while improving the ecological environment. Additionally, pollution from waste gas, wastewater, and waste can also be effectively treated through the application of nuclear technology.

4) Public Safety: Nuclear detection technology can utilize radiation to determine the types of substances, thus being widely applied in various security inspection scenarios such as stations, luggage, passengers, and containers. The main nuclear detection technologies include X-ray security inspection technology and neutron detection technology.

Related Targets and Investment Recommendations

It is recommended to pay attention to China General Nuclear Power Corporation Technology (000881.SZ), China National Nuclear Corporation (01763), Zhongjin Irradiation (300962.SZ), Tongfang Co., Ltd. (600100.SH), Yinkang Life (300143.SZ), Dongcheng Pharmaceutical (002675.SZ), Walden Nuclear Materials (002130.SZ), China Nuclear Power (601985.SH), and Xinhongye (301310.SZ), etc.

Risk Warning:

1. The expansion of nuclear technology applications may not meet expectations. The continuous expansion of nuclear technology applications has a significant impact on the operational status of companies in the industry. If the expansion of non-power nuclear technology applications does not meet expectations, it may bring adverse factors to the performance growth of related companies.

2. The localization process of non-power nuclear technology may not meet expectations. Currently, the degree of localization in several high-end nuclear technology application fields represented by nuclear medicine in China is relatively low. If the localization process of the aforementioned industries does not meet expectations in the future, it may affect the performance of related manufacturers in China.

3. Market competition is intensifying. Currently, there are many manufacturers involved in various segments of non-power nuclear technology applications. If the intensity of market competition continues to increase in the future, it will affect the performance growth of each company and negatively impact their profitability.

4. Policy support may not meet expectations. The implementation of policies has a significant impact on the performance of companies in the non-power nuclear technology application industry. If policy advancement does not meet expectations, it may adversely affect the performance of listed companies in the industry, thereby impacting the market performance of these companies