HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

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<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> has a very good 3Q22 with earnings increased 55.1% YoY. This has reversed the trend of lower profit YoY in the last two quarters.</li>
<li>The pressure on margin has lessened relative to 1H22 and this is partly reflected by good cost performance. Tariffs for wind and other renewables also look resilient. </li>
<li>Recent pullback in share price has returned Longyuan to attractive multiples. Its growth stories stay intact and outperformance against national power generation is encouraging.</li>
</ul>



China Longyuan Power (916 HK) has a very good 3Q22 with earnings increased 55.1% YoY. This has reversed the trend of lower profit YoY in the last two quarters.
The pressure on margin has lessened relative to 1H22 and this is partly reflected by good cost performance. Tariffs for wind and other renewables also look resilient. 
Recent pullback in share price has returned Longyuan to attractive multiples. Its growth stories stay intact and outperformance against national power generation is encouraging.


China Longyuan (916 HK): Continuing the Good Upturn

China Power International / Equity Bottom-Up

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<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> is the hardest hit in this round of market sell-off with a 28.9% plunge in share price in Sep - we think this is overdone. </li>
<li>Coal-Fired margin, which is the key drag in 1H22, will improve in 2H22. Its clean energy segment has performed well, and new capacity acquired will start to provide contribution.</li>
<li>Its strategic transformation target of over 90% of capacity from new energy by 2025, up from 50.7% in 1H22, has not changed. Parent asset injection will generate massive upside potential. </li>
</ul>



China Power International (2380 HK) is the hardest hit in this round of market sell-off with a 28.9% plunge in share price in Sep - we think this is overdone. 
Coal-Fired margin, which is the key drag in 1H22, will improve in 2H22. Its clean energy segment has performed well, and new capacity acquired will start to provide contribution.
Its strategic transformation target of over 90% of capacity from new energy by 2025, up from 50.7% in 1H22, has not changed. Parent asset injection will generate massive upside potential. 


China Power International (2380 HK): We Think Good Opportunities Are Presented

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<li>
<a href="https://www.smartkarma.com/entities/cgn-power-co-ltd-h" target="_blank" data-smartkarma-citation="entities:58:1" rel="noopener">CGN Power (1816 HK)</a>, as China's largest nuclear power company, has its profit outperformed coal-fired and wind power peers in 1H22 given its stable cost control and higher tariff.  </li>
<li>We expect contribution from Hongyanhe #6, normalised operations from existing projects, further margin expansion, solid project pipeline and positive new project potential to be the key earnings drivers. </li>
<li>Its target to reach capacity of 70GW by 2035 should underpin long-term outlook. YTD, the stock has outperformed most peers, yet valuation multiples are still cheaper than peer average.</li>
</ul>



CGN Power (1816 HK), as China's largest nuclear power company, has its profit outperformed coal-fired and wind power peers in 1H22 given its stable cost control and higher tariff.  
We expect contribution from Hongyanhe #6, normalised operations from existing projects, further margin expansion, solid project pipeline and positive new project potential to be the key earnings drivers. 
Its target to reach capacity of 70GW by 2035 should underpin long-term outlook. YTD, the stock has outperformed most peers, yet valuation multiples are still cheaper than peer average.


CGN Power (1816 HK): Building up Stronger Potential

<ul>
<li>Share price of <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> has been under pressure over the last two weeks due to concern on future offshore wind power project return.</li>
<li>We believe the low tariff of Rmb0.19/kWh won by a Huaneng Power Group consortium in Fujian is more an exceptional case and should not be taken as a new normal.</li>
<li>China Longyuan's growth has been well secured by its project pipeline as well as 21GW potential injection from parent. This round of de-rating is just too excessive. </li>
</ul>


Share price of China Longyuan Power (916 HK) has been under pressure over the last two weeks due to concern on future offshore wind power project return.
We believe the low tariff of Rmb0.19/kWh won by a Huaneng Power Group consortium in Fujian is more an exceptional case and should not be taken as a new normal.
China Longyuan's growth has been well secured by its project pipeline as well as 21GW potential injection from parent. This round of de-rating is just too excessive. 


China Longyuan (916 HK): A De-Rating Too Excessive

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<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> will acquire 2.15GW clean energy capacity from its parent SPIC for a total of Rmb7.5bn. This will add 14.3% to its end-FY21 clean energy portfolio.</li>
<li>We think the assets are priced attractively at 12.5x PER for FY21, a discount to peers' average of 14x. The acquired capacity has an impressive 45.8% YoY earnings growth.</li>
<li>CPI targets to have 70% of end-FY23 capacity from clean energy, and this implies a 46.3% CAGR between FY21 and FY23, which is a very exciting momentum. </li>
</ul>



China Power International (2380 HK) will acquire 2.15GW clean energy capacity from its parent SPIC for a total of Rmb7.5bn. This will add 14.3% to its end-FY21 clean energy portfolio.
We think the assets are priced attractively at 12.5x PER for FY21, a discount to peers' average of 14x. The acquired capacity has an impressive 45.8% YoY earnings growth.
CPI targets to have 70% of end-FY23 capacity from clean energy, and this implies a 46.3% CAGR between FY21 and FY23, which is a very exciting momentum. 


China Power International (2380 HK): Another Step in Clean Energy Transition

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 Longyuan (916 HK): Continuing the Good Upturn

Longyuan has a solid 3Q22 profit, reversing the trend of weaker YoY earnings in 1Q22 and 2Q22. It has the ability to outperform national generation...

Osbert Tang, CFA

China Power International (2380 HK): We Think Good Opportunities Are Presented

CPI's share price has overly reacted to market's concern on slowing economic and power demand outlook. Its new energy transformation and parent...

Osbert Tang, CFA

CGN Power (1816 HK): Building up Stronger Potential

Contribution from Hongyanhe #6, normalised operations from existing projects, further margin expansion, solid project pipeline and positive new...

Osbert Tang, CFA

China Longyuan (916 HK): A De-Rating Too Excessive

The plunge in valuation has more than reflected the concerns on weaker return outlook for offshore wind power projects, but China Longyuan's long...

Osbert Tang, CFA

China Power International (2380 HK): Another Step in Clean Energy Transition

Acquisition of 2.15GW of clean energy capacity from its parent will push ahead CPI's target of having 70% of capacity from clean energy at end...

Osbert Tang, CFA

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