Utilities Sector

• Low valuation against peers in China albeit China Datang Corp Renewable Power (1798 HK) is one of the few pure-play wind farm operators in HK. 
• Its free cash flow reached its highest in more than 10 years. 
• The challenging equity market makes China Datang Renewable Power looks even more attractive.

• At the beginning of the week, China was redoubling its efforts to bolster food security by trying to cut the amount of soybeans that get turned into animal feed.
• China is by far the world’s biggest importer of soybeans, which account for the bulk of its consumption.
• A lower ratio would of course mean fewer soybean imports needed as demand would somehow decline a bit.

• Environmental:  KEPCO’s power transmission tower construction is destroying ecosystems and posing a climate risk in various areas, which is also why the coal mine development project in Australia was suspended. 
• Social : 58% of KEPCO’s suppliers were found to be illegal subcontractors leading to controversy over work environment issues. Also, the construction of power transmission towers sparked serious community conflicts.
• Governance : Despite KEPCO’s large deficit, the company’s moral risk and poor risk management issues, such as corruption and excessive wages of employers, continue to surface. 

• We maintain the BUY call while raising the TP by 7%to Bt62.0 on the back of SOTP adjustment to factor in acquisition of new 588MWe Jackson Generation power project (US) 
• 49% holding in the US project will add Bt4 in SOTP The company informs the SET about acquiring 49% stake in 1,200 MW (588MWe) Gas power plant “Jackson Generation”
• The company supplies electricity to the PJM (Pennsylvania, New Jersey, and Maryland) which is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in the US

• With concerns on weaker 1H22 profit and lower industry return (due to Lianjiang offshore project) now behind us, China Longyuan Power (916 HK) is well set for better 2H22.
• Utilisation hours should see improvement while new capacity growth is another major driver. The upgrades of aged and small-sized units will almost double its existing capacity. 
• Receipt of Rmb11.4bn subsidies clearly represented an acceleration in collection. This will stay as contributor to better cash flow and enhance financial position. 

• We believe KEPCO is well-positioned within the utility sector to benefit from growing support for nuclear restarts among policy makers and the general public
• Given its substantial nuclear power generating capacity, KEPCO will likely see best-in-class balance sheet and cash flow-generation over the next several years.
• This puts KEPCO well ahead of peers in terms of both environmental credentials and attractive shareholder returns.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. ABM Investama
2. China Jinmao Holdings
3. Lifestyle International Holdings
4. Geely Auto
5. First Pacific Co

and more…

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• ABM Investama
• Azure Power Global Ltd

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
• Based on the latest data, I expect one ADD/DEL for SENSEX, one ADD/DEL for BSE 100, and 3 ADDs/DELs for BSE 200. 
• The potential ADDs/DELs for SENSEX could see index flows of US$100mn or more but the other index changes are both small in size and volume impact (days-to-trade).

• Nuclear power is a clean energy source that contributes to energy savings and emissions reduction in society.
• SASAC backed CGN Power (1816 HK) is China’s leading nuclear play, accounting for 55% of on-grid nuclear power generation, but just 1.2% of China’s total installed capacity of power generation.
• As one of the few listed nuclear -plays in Asia, CGN trades at undemanding multiples, together with an attractive ROE and yield.

• 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.

• We are two-thirds of the way through the review period for the December review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close 16 December.  
• We see Adani Green Energy (ADANIGR IN) as the highest ranked non-constituent in inclusion zone, while Dr. Reddy’s Laboratories (DRRD IN) is the lowest ranked constituent in deletion zone.
• Passive trackers will need to trade over 10 days of delivery volume on Adani Green Energy (ADANIGR IN) and Dr. Reddy’s Laboratories (DRRD IN), so the impact will be significant.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Azure Power Global Ltd

• The benchmark, CRB Commodity Index, ended the week 2,4% higher
• While natural gas made a higher high, the fertilizer complex remained in a sideways market for some time.
• Last week fertilizer prices saw an awakening, as especially European natgas prices rallied further. US Gulf Urea futures jumped 20% while Middle East Urea futures jumped 18% w/w.