HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<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.


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>'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

<ul>
<li>Power output 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> is healthy in Jul-Aug, following the solid trend in 1H23. The drop in hydropower has moderated and wind and solar stayed decent.</li>
<li>Capacity growth will reach 43% in FY23. With just 7.8% YoY in 1H23, most of the new capacity will be added in 4Q23, accelerating both output and profitability.</li>
<li>The parent SPIC's massive clean energy assets are candidates for potential injection. CPI's high EPS CAGR of 28.8% means that it well deserves premium valuation multiples. </li>
</ul>


Power output for China Power International (2380 HK) is healthy in Jul-Aug, following the solid trend in 1H23. The drop in hydropower has moderated and wind and solar stayed decent.
Capacity growth will reach 43% in FY23. With just 7.8% YoY in 1H23, most of the new capacity will be added in 4Q23, accelerating both output and profitability.
The parent SPIC's massive clean energy assets are candidates for potential injection. CPI's high EPS CAGR of 28.8% means that it well deserves premium valuation multiples. 


China Power International (2380 HK): Continuing the Turnaround Trend

<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> is now attractively priced at 5.9x and 5.2x PERs for FY23 and FY24, respectively. The 2Q23 result clearly showed that business is gathering momentum.</li>
<li>Margins have demonstrated good improvement despite weaker tariffs and coal sale business. With a very low base in last year, its 2H23 earnings growth will be impressive.</li>
<li>There is positive progress on new project sign-up which has secured its pipeline. Asset injection from parent will stay as a major theme in the next two years.</li>
</ul>



China Longyuan Power (916 HK) is now attractively priced at 5.9x and 5.2x PERs for FY23 and FY24, respectively. The 2Q23 result clearly showed that business is gathering momentum.
Margins have demonstrated good improvement despite weaker tariffs and coal sale business. With a very low base in last year, its 2H23 earnings growth will be impressive.
There is positive progress on new project sign-up which has secured its pipeline. Asset injection from parent will stay as a major theme in the next two years.


China Longyuan (916 HK): Value Has Definitely Emerged

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 monthly Hong Kong Connect flows with our data engine.</li>
<li>We tabulate the top stocks by inflows, outlfows, and holding by mainland investors.</li>
<li>We analyzed the Hong Kong Connect Scheme for April and highlight flows for China Mobile, SMIC, PetroChina, Sensetime, CNOOC, CCB, Tencent, HKEx.</li>
</ul>


We analyze the monthly Hong Kong Connect flows with our data engine.
We tabulate the top stocks by inflows, outlfows, and holding by mainland investors.
We analyzed the Hong Kong Connect Scheme for April and highlight flows for China Mobile, SMIC, PetroChina, Sensetime, CNOOC, CCB, Tencent, HKEx.


Hong Kong Connect Flows Monthly: China Mobile, SMIC, PetroChina, Sensetime, CNOOC, CCB, Tencent

Hong Kong

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

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China Power International (2380 HK)

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