HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The China Power Sector has revived on the back of industry tariff reforms, higher consumption driven by AI adoption, and an increase in grid investments. Yet, there are still values.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-power-international" target="_blank" data-smartkarma-citation="entities:15548:1" rel="noopener">China Power International (2380 HK)</a> and <a href="https://www.smartkarma.com/entities/huaneng-power-intl-inc-h" target="_blank" data-smartkarma-citation="entities:28:1" rel="noopener">Huaneng Power Intl Inc H (902 HK)</a> are the power conglomerates that look attractive on fundamentals, earnings and valuations.</li>
<li>Among clean energy names, <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a> is a laggard YTD. However, earnings growth should accelerate and its multiples are not stretched.</li>
</ul>


The China Power Sector has revived on the back of industry tariff reforms, higher consumption driven by AI adoption, and an increase in grid investments. Yet, there are still values.

China Power International (2380 HK) and Huaneng Power Intl Inc H (902 HK) are the power conglomerates that look attractive on fundamentals, earnings and valuations.
Among clean energy names, China Longyuan Power (916 HK) is a laggard YTD. However, earnings growth should accelerate and its multiples are not stretched.


China Power Sector: Where Can We Still Find Value?

Equity Bottom-Up

China Power International / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-power-international" target="_blank" data-smartkarma-citation="entities:15548:1" rel="noopener">China Power International (2380 HK)</a>'s earnings should accelerate in FY24, and rebound in hydropower is a key driver. Hydropower generation surged 84.3% YoY in 2M24.</li>
<li>The 9.3GW of capacity acquired in Oct will provide first full-year contribution in FY24. Better economics for coal-fired plants will add to profit momentum.</li>
<li>The 6pp increase in dividend payout signals management's positive view in the outlook, and the Chairman is explicitly confident in good FY24 profit growth. </li>
</ul>



China Power International (2380 HK)'s earnings should accelerate in FY24, and rebound in hydropower is a key driver. Hydropower generation surged 84.3% YoY in 2M24.
The 9.3GW of capacity acquired in Oct will provide first full-year contribution in FY24. Better economics for coal-fired plants will add to profit momentum.
The 6pp increase in dividend payout signals management's positive view in the outlook, and the Chairman is explicitly confident in good FY24 profit growth. 


China Power International (2380 HK): Powering Forward

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a> should see a mean reversion of its valuations. It has rebounded 36% from the the 2024 trough, but has only gone up 0.3% YTD.</li>
<li>There are three catalysts in place to drive the move: acceleration in power generation, cash flow improvement, and recovery in the wind power market.</li>
<li>Its P/B is at a 40% discount to average, and a return to such level will generate a 60% upside. Even after reversion, its PER of 7.8x is not stretched.</li>
</ul>



China Longyuan Power (916 HK) should see a mean reversion of its valuations. It has rebounded 36% from the the 2024 trough, but has only gone up 0.3% YTD.
There are three catalysts in place to drive the move: acceleration in power generation, cash flow improvement, and recovery in the wind power market.
Its P/B is at a 40% discount to average, and a return to such level will generate a 60% upside. Even after reversion, its PER of 7.8x is not stretched.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-power-international" target="_blank" data-smartkarma-citation="entities:15548:1" rel="noopener">China Power International (2380 HK)</a>'s Jan power sales showed a sharp 41.2% YoY growth. More importantly, this marks sustaining a solid MoM trend in the last few months. </li>
<li>Recovery of the hydropower generation is encouraging as this was a drag last year. Meanwhile, higher coal-fired generation will capture the better profitability of this segment.</li>
<li>CPI's strongest earnings CAGR in the sector has made its earnings multiples increasingly cheap over the next two years. After +15.7% YTD in its share price, there is further upside.</li>
</ul>



China Power International (2380 HK)'s Jan power sales showed a sharp 41.2% YoY growth. More importantly, this marks sustaining a solid MoM trend in the last few months. 
Recovery of the hydropower generation is encouraging as this was a drag last year. Meanwhile, higher coal-fired generation will capture the better profitability of this segment.
CPI's strongest earnings CAGR in the sector has made its earnings multiples increasingly cheap over the next two years. After +15.7% YTD in its share price, there is further upside.


China Power International (2380 HK): We See More Upside

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 13th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight weekly Hong Kong Connect flows for Meituan and Tencent.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 13th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight weekly Hong Kong Connect flows for Meituan and Tencent.


Hong Kong Connect Flows (Oct 13th): Meituan, Tencent

China

Xinyi Energy Holdings Limited operates as a renewable energy project development company. The Company provides installation, construction, and maintenance of solar plant, as well as offers photovoltaic transformation systems. Xinyi Energy Holdings serves customers in China.

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Xinyi Energy Holdings (3868 HK)

China Power Sector: Where Can We Still Find Value?

China's power sector is thriving with industry reforms and AI adoption, making China Power and Huaneng Power attractive. China Longyuan is a clean...

Osbert Tang, CFA

China Power International (2380 HK): Powering Forward

China Power Intl is set for earnings acceleration in FY24, driven by rebounding hydropower generation and increased capacity acquisition, with...

Osbert Tang, CFA

China Longyuan (916 HK): Mean Reversion

China Longyuan is poised for a valuation mean reversion with three catalysts: power generation acceleration, cash flow improvement, and wind power...

Osbert Tang, CFA

China Power International (2380 HK): We See More Upside

CPI saw a strong 41.2% growth in Jan power sales, sustaining a solid MoM trend. Recovery in hydropower and higher coal-fired generation will boost...

Osbert Tang, CFA

Hong Kong Connect Flows (Oct 13th): Meituan, Tencent

We analyzed the Hong Kong Connect Scheme for last week and highlight weekly flows for Meituan (3690HK) and Tencent (700HK).

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Power Sector: Where Can We Still Find Value?

​China's power sector is thriving with industry reforms and AI adoption, making China Power and Huaneng Power attractive. China Longyuan is a clean...

Osbert Tang, CFA

China Power International (2380 HK): Powering Forward

​China Power Intl is set for earnings acceleration in FY24, driven by rebounding hydropower generation and increased capacity acquisition, with...

Osbert Tang, CFA

China Longyuan (916 HK): Mean Reversion

​China Longyuan is poised for a valuation mean reversion with three catalysts: power generation acceleration, cash flow improvement, and wind power...

Osbert Tang, CFA

China Power International (2380 HK): We See More Upside

CPI saw a strong 41.2% growth in Jan power sales, sustaining a solid MoM trend. Recovery in hydropower and higher coal-fired generation will boost...

Osbert Tang, CFA

Hong Kong Connect Flows (Oct 13th): Meituan, Tencent

We analyzed the Hong Kong Connect Scheme for last week and highlight weekly flows for Meituan (3690HK) and Tencent (700HK).

Ke Yan, CFA, FRM

China's power sector is thriving with industry reforms and AI adoption, making China Power and Huaneng Power attractive. China Longyuan is a clean...

China Power Intl is set for earnings acceleration in FY24, driven by rebounding hydropower generation and increased capacity acquisition, with...

China Longyuan is poised for a valuation mean reversion with three catalysts: power generation acceleration, cash flow improvement, and wind power...