David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>A "valuation system with Chinese characteristics" has the media, ostensibly, discussing whether this implies a premium for SOEs and companies aligned with national goals.</li>
<li>In early 2020, SOE-backed clean energy play <a href="https://www.smartkarma.com/entities/cgn-new-energy-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:4295:1" rel="noopener">CGN New Energy Holdings (1811 HK)</a> was subject to a potential privatisation from its parent; but it failed to materialise. </li>
<li>During the 14th and 15th Five-Year Plans (2021-30) period, China's installed capacity for wind and solar power is expected double.</li>
</ul>

Osbert Tang, CFA

China Analyst - Equity Long-Short, Onshore Credit

<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 Group Corp (916 HK)</a> is expected to see an exciting year on the back of faster capacity growth, increase in utilisation hours and higher average tariff.</li>
<li>Potential asset injection from its parent CHN Energy remains a wild card. It may grow its capacity by an average of 30% over the next three years if materialises.</li>
<li>Lower funding costs and the return to A-share are positive to Longyuan's expansion. We think consensus forecasts for next 2 years are too low and represent potential upside surprises.</li>
</ul>

<ul>
<li>We think the underperformance of <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> (CPI) against the market in this year is unjustified given a projected improvement in profitability.</li>
<li>CPI has secured coal supply with more than 60% of contracts on annual long-term basis within the benchmark price range. Also, power tariff is expected to be on an uptrend.</li>
<li>The proposed new management incentive scheme will better align management's and shareholders' interests. CPI also indicated good room to lower leverage in this year while sustaining growth. </li>
</ul>

<ul>
<li>2H21 is bad for <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> as coal price surged. But the positive news is that its wind and solar segments logged a 50.6% full-year profit growth.</li>
<li>There is good progress on transformation and it has 7GW of clean energy capacity to come on stream in FY22. This is equivalent to 46% of the existing capacity.</li>
<li>CPI said coal-fired plants are marginally profitable in Jan-Feb; meanwhile, hydropower will do better in this year. Overall, these set the stage for a turnaround.</li>
</ul>

<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 Group Corp (916 HK)</a> achieved an impressive 39.4% YoY growth in wind power generation in 2M21 on a low base a year ago. However, even as we compared 2M21 generation with 2M19, the CAGR still reach a resilient 18.4%. This suggested that the low base effect is not a key reason for the surge in generation, but instead, the underlying demand is resilient. Longyuan has taken a beating on the back of the concerns on future tariff, on-grid capacity and profitability if the proposal in the consultation paper released by the National Energy Association is fully implemented. However, with its valuation now back to the end-2020 level (10x PER), we see a lot of uncertainties have been discounted. With a 34% plunge in share price in just 5 trading days and 49% from its peak, the market has already turned from overly bullish to overly bearish, in our view.

Hong Kong

CGN New Energy Holdings Co Ltd is a diversified independent power producer in Asia. The Company has a portfolio of gas-fired, coal-fired, oil-fired, hydro, cogen and fuel cell power generation projects in the People's Republic of China and Korea.

ADTV (USDm)	0.00
52-week Range	0.00 - 0.00
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Dividend (Yield)	0.00

CGN New Energy Holdings - 1811 HK

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