HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Power International / Equity Bottom-Up

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<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>
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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

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<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>
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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

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<li>The Rmb10.8bn acquisition of clean energy assets from parent by <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 positive in raising its clean energy proportion to over 70% of total capacity.</li>
<li>The drop in share price reflects concerns about elevation of gearing and the need for potential equity funding. However, even all equity financing scenario will only dilute EPS by 1%.</li>
<li>We think its earnings quality will improve, balance sheet will be enhanced and profitability will be raised. Its 1H23 positive profit alert also showed a recovery in operational performance. </li>
</ul>


The Rmb10.8bn acquisition of clean energy assets from parent by China Power International (2380 HK) is positive in raising its clean energy proportion to over 70% of total capacity.
The drop in share price reflects concerns about elevation of gearing and the need for potential equity funding. However, even all equity financing scenario will only dilute EPS by 1%.
We think its earnings quality will improve, balance sheet will be enhanced and profitability will be raised. Its 1H23 positive profit alert also showed a recovery in operational performance. 


China Power International (2380 HK): A Major Move to Raise Clean Energy Exposure

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<a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd-49b9d808-e8c9-4049-a85a-5380de9f21ad" target="_blank" data-smartkarma-citation="entities:35558:1" rel="noopener"></a>YTD, <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 seen its share price weak, but we believe focus should not be on the poor FY22 result and the moderate 1Q23 generation growth.</li>
<li>Based on 5.5-6.5GW planned capacity expansion in FY23, this will mean a solid growth of 17.7-20.9% YoY. Coupled with efficiency improvement, we expect a sharp rebound in FY23 profit.</li>
<li>With impairment on Ukraine mostly made and reversal of exchange and trading losses, there will be a big swing in bottom line. We welcome the improvement in cash flow too.</li>
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YTD, China Longyuan Power (916 HK) has seen its share price weak, but we believe focus should not be on the poor FY22 result and the moderate 1Q23 generation growth.
Based on 5.5-6.5GW planned capacity expansion in FY23, this will mean a solid growth of 17.7-20.9% YoY. Coupled with efficiency improvement, we expect a sharp rebound in FY23 profit.
With impairment on Ukraine mostly made and reversal of exchange and trading losses, there will be a big swing in bottom line. We welcome the improvement in cash flow too.


China Longyuan (916 HK): We Stay on the Bull Camp

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<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 enjoy another year of strong earnings improvement in FY23, as coal-fired segment returns to profit and new energy capacity drives growth.</li>
<li>Solar and wind capacity will increase 66.5% and 23.1%, respectively, raising new energy's proportion to over 70%. Profitability for hydropower also looks to recover in this year.</li>
<li>There is huge room for asset injection from SPIC given the parent's new energy capacity of 139GW, with only 20GW in CPI. Its FY23 PER of 8.4x PER is attractive. </li>
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China Power International (2380 HK) will enjoy another year of strong earnings improvement in FY23, as coal-fired segment returns to profit and new energy capacity drives growth.
Solar and wind capacity will increase 66.5% and 23.1%, respectively, raising new energy's proportion to over 70%. Profitability for hydropower also looks to recover in this year.
There is huge room for asset injection from SPIC given the parent's new energy capacity of 139GW, with only 20GW in CPI. Its FY23 PER of 8.4x PER is attractive. 


China Power International (2380 HK): This Will Be a Rewarding Year

Hong Kong

China Power International Development Limited, through its subsidiaries, develops, constructs, owns, manages, and operates large power plants in China.

China Power International (2380 HK)