CHINA POWER(02380) 华泰证券·2024-12-15 04:10Investment Rating - The report maintains a "Buy" rating for China Power (2380 HK) with a target price of HKD 3.92 [1] Core Views - China Power is a comprehensive clean energy platform under the State Power Investment Corporation (SPIC) with a TTM dividend yield of 6.42% and a PB (MRQ) of 0.64x, indicating significant valuation appeal [1] - The company plans to use its 63% stake in Wuling Power and 64.93% stake in Changzhou Hydropower as consideration to subscribe for new shares in Yuanda Environmental, which is expected to reduce the debt-to-asset ratio and potentially enhance valuation through A-share hydropower assets [1][3] - In 1H24, China Power's net profit attributable to shareholders increased by 53% YoY to RMB 2.57 billion, driven by strong performance in clean energy [1] Operational Performance - In 3Q24, coal-fired power sales increased by 4.6% YoY to 15.7 billion kWh, accelerating from 0.4% growth in 1H24, due to increased coal power output during peak summer demand [2] - Wind and solar power sales in October 2024 grew by 39.9% and 12.8% YoY, respectively, though the growth rate slowed compared to the 59.4% and 90.8% increases in 1-9M24, primarily due to a high base effect from the 7.5GW clean energy assets injected in October 2023 [2] Strategic Initiatives - The proposed red-chip control of A-share hydropower platform Yuanda Environmental is expected to accelerate China Power's energy transition goals and facilitate the injection of high-quality projects from SPIC [3] - Despite market concerns over the dilution of China Power's stake in hydropower assets, the company anticipates faster growth in asset and profit scale post-restructuring [3] Financial Forecasts - The report revises down China Power's new clean energy capacity additions by 33%, 9%, and 0% for 2024-2026, and adjusts wind and solar power tariffs, leading to a reduction in net profit attributable to shareholders by 2%, 8%, and 14% to RMB 5.0 billion, RMB 5.6 billion, and RMB 6.2 billion, respectively [4] - Based on 2025E forecasts, the target market capitalization is RMB 44.8 billion (HKD 48.5 billion), with a target price of HKD 3.92, derived from a sum-of-the-parts (SOTP) valuation approach [4] Valuation Metrics - The report provides detailed valuation metrics for China Power, including PE, PB, and EV/EBITDA ratios, with 2025E PE/PB for new energy, thermal power, and hydropower at 10x, 0.5x, and 1.2x, respectively [4][6] - The company's ROE is expected to improve from 9.00% in 2024E to 10.05% in 2026E, reflecting stronger profitability [6] Industry Comparison - Comparable company valuations for thermal power, hydropower, and new energy sectors are provided, with average 2025E PB ratios of 0.80x, 2.6x, and 6x, respectively [10]