Guotai Junan International: Maintain "Buy" rating on CHINA RES POWER (00836) with a target price of 24 Hong Kong dollars.

Guoyuan International released a research report stating that they maintain a "buy" rating for CHINA RES POWER (00836) with an updated target price of HK$24, which is equivalent to 8 times PE for 2024 and 7.1 times PE for 2025, representing a 30% upside potential from the current price. Benefiting from the decline in coal prices, the company's thermal power profits continue to recover. In terms of wind power, short-term profits are under pressure, but the company maintains its guidance for adding 10GW of new installed capacity in new energy for the whole year. Guoyuan International's main points are as follows: Thermal power profits continue to recover due to the decline in coal prices: Benefiting from the decline in coal prices, the company's unit fuel costs in the first half of the year decreased by 10.7% year-on-year, resulting in a significant recovery in the company's thermal power profits, with core profits contributing HK$2.715 billion (compared to HK$726 million in the first half of 2023). Considering that coal prices were already low in the second half of last year, the company expects a narrower decline in unit fuel costs in the second half of 2024, with costs expected to decrease by 6%-7% for the whole year. In terms of electricity prices, based on the mid-to-long-term electricity prices for 2024, 80% of the annual mid-to-long-term contracted electricity quantity is at a price 18.5% higher than the benchmark electricity price, leading to a stable electricity price expectation for 2024. Therefore, with the downward trend in coal prices, along with the continuous improvement of capacity electricity prices and auxiliary service policies, the company's thermal power business profits will steadily increase. The focus will be on the signing of mid-to-long-term electricity prices for 2025 in the future. Short-term wind power profits are under pressure, while the whole year maintains the guidance for adding 10GW of new installed capacity in new energy: Due to various factors such as poor wind conditions, increasing curtailment, and declining average grid-connected electricity prices in the first half of the year, the core profits contribution of the company's renewable energy business was HK$5.556 billion (compared to HK$5.954 billion in the first half of 2023), representing a 6.7% year-on-year decrease. In the first half of the year, the company added 930MW of new renewable energy grid-connected capacity, reaching close to 1.1GW by the end of July, and the company maintains its unchanged target of adding 10GW of new installed capacity for the whole year, mainly focusing on grid-connecting and commissioning in the third and fourth quarters. Updates on key issues regarding the spin-off of new energy for listing, asset impairment, and dividend payments: 1) The company has submitted a complete set of relevant materials for the spin-off and listing of CR New Energy A-shares to the regulatory authorities, and it is waiting for the appropriate window period; 2) There are currently no signs of significant asset impairment for the company; 3) A mid-term dividend of HK$0.455 has been declared, meeting market expectations, with a continued 40% dividend payout ratio for the whole year, and regular reviews of dividend policy are conducted to ensure sufficient market competitiveness.