Huayuan Securities: Maintains a "buy" rating for CHINA RES POWER (00836), with the forecast that its mid-term performance in 2024 will exceed expectations.

Huayuan Securities released a research report stating that it maintains a "buy" rating on CHINA RES POWER (00836), based on the company's interim performance. It maintains the forecasted net profit attributable to the parent company for 2024-2026 at HK$14.22 billion, HK$16.06 billion and HK$18.28 billion respectively. The current stock price corresponds to PE ratios of 7, 6, and 5 times respectively. The rating is maintained based on the company's continued strong performance and the efforts towards clean transformation. The company released its interim performance for 2024, with the profit attributable to equity shareholders amounting to HK$9.363 billion, a year-on-year increase of 38.91%; and core profit attributable to equity shareholders at HK$8.271 billion, a year-on-year increase of 23.81%. Key points of Huayuan Securities are as follows: Challenges in wind conditions affect the performance of new energy, but the stability of new energy electricity prices exceeds expectations. In the first half of the year, the company added installed capacity of wind power and photovoltaic equity of 0.50GW and 1.56GW respectively. As of the end of June 2024, the company's wind power installed capacity in operation was 19.12GW with 7.53GW under construction; photovoltaic installed capacity in operation was 5GW with 8.01GW under construction. In the first half of 2024, wind power and photovoltaic electricity sales volumes increased by 6.9% and 204.9% year-on-year respectively. Wind power utilization hours were at 1223 hours, a decrease of 129 hours year-on-year, and the growth in wind power generation was mainly attributed to the installation and commissioning in the second half of 2023. In terms of electricity prices, benefiting from factors such as the good supply-demand situation in the areas where the company's units are located, the average grid-connected electricity price for wind power in the first half of the year decreased by 1.9% year-on-year. The stability of electricity prices far exceeds the industry average. Considering the lower prices of new parity projects, it is expected that the company's existing project electricity prices will remain stable. The company's renewable energy sector achieved core profits of HK$5.556 billion in the first half of 2024, a decrease of 6.68% year-on-year, showing stability in performance above the industry average, reflecting the company's good governance capabilities. The decline in coal prices drives the improvement of the coal power sector's performance, with profit margins also at a leading level in the industry. In the first half of 2024, the company's thermal power generation increased by 3.4% year-on-year, with the average coal price decreasing by 10.6% year-on-year and unit fuel costs decreasing by 10.7% year-on-year. Comprehensive impact led to the company's core profit from thermal power in the first half of the year amounting to HK$2.715 billion (excluding minority interests), a year-on-year increase of 274%, with an absolute increment close to HK$2 billion, mainly benefiting from the favorable geographical layout of the company's existing thermal power units. The company's thermal power units focus on the Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei region, coastal and along railway lines, with the majority of units located in economically developed or regions with tight supply-demand. In pressure tests over the past few years, they have demonstrated profitability far exceeding their peers. Since 2023, profit recovery has led the industry, and with future coal prices entering a reasonable range of decline, the company's coal power sector is expected to further release performance elasticity. The clean transformation target for installed capacity is steadily advancing, with plans to add 10GW of new energy installed capacity in 2024. In 2020, the company put forward the goal of adding 40GW of new energy installed capacity during the 14th Five-Year Plan period, firmly committed to clean transformation of the installed capacity. The company plans to spend HK$59.9 billion in capital expenditure in 2024, of which HK$44.6 billion will be used for wind power and photovoltaic power stations. The interim report reiterated the plan to add a total of 10GW of new energy installed capacity in 2024. The company's clean transformation is steadily progressing, with unit installed capacity returns in the green energy sector ranking among the top tier of power central enterprises. With a strong market-oriented gene, it is expected that returns will be guaranteed. Risks: 1) Fluctuations in coal prices; 2) Changes in subsidy policies; 3) Intensified industry competition.