Haitong: Maintains CHINA RES POWER (00836) "Outperform" Rating with Fair Value of 21.91-28.17 Hong Kong Dollars.

Haitong released a research report stating that it maintains a "outperform" rating for CHINA RES POWER (00836), with an estimated net profit attributable to equity holders of 15, 17.2, and 18.8 billion Hong Kong dollars for the years 2024-2026, and earnings per share of 3.13, 3.57, and 3.90 Hong Kong dollars, respectively. The reasonable value range is 21.91-28.17 Hong Kong dollars. The bank believes that the company: (1) has high-quality assets, with ROE levels ranking at the forefront of power companies, and the performance of thermal power is expected to continue to improve as coal prices decline; (2) is undervalued, with the current 24-year PE valuation at 6x PE, and recent policies on demand for green electricity could benefit the company; (3) based on a dividend payout ratio of 40%, the current dividend yield is approximately 6.7%. The company released its interim report for the first half of 2024: the main operating income was 51.1 billion Hong Kong dollars, a decrease of 0.7% year-on-year; the net profit attributable to equity holders was 9.36 billion Hong Kong dollars, an increase of 38.9% year-on-year. The EPS was 1.95 Hong Kong dollars, with an interim dividend of 0.455 Hong Kong dollars. The composition of net profit for the first half of 2024 included core profit from thermal power of 2.72 billion Hong Kong dollars, income from the acquisition of Guangxi Hezhou thermal power of 0.876 billion Hong Kong dollars, renewable energy core profit of 5.56 billion Hong Kong dollars, and exchange gains of 290 million Hong Kong dollars. The core profit from thermal power was 2.71 billion Hong Kong dollars (7.3 billion Hong Kong dollars in the first half of 2023), with a core profit per kWh of 0.038 Hong Kong dollars, an increase of 0.027 Hong Kong dollars year-on-year. The main reasons for this increase were: (1) the standard coal price in the first half of 2024 was 935 yuan/ton, a decrease of 111 yuan/ton year-on-year; and the unit fuel cost was 0.277 yuan/kWh, a decrease of 0.033 yuan/kWh year-on-year; (2) the calculated revenue per kWh for thermal power was 0.423 yuan, a decrease of 0.017 yuan year-on-year. The core profit from renewable energy was 5.56 billion Hong Kong dollars (59.5 billion Hong Kong dollars in the first half of 2023), with a core profit per kWh of 0.213 Hong Kong dollars, a decrease of 0.049 Hong Kong dollars year-on-year. The main reasons for this decrease were: (1) the calculated revenue per kWh for renewable energy was 0.504 Hong Kong dollars, a decrease of 0.042 Hong Kong dollars year-on-year; (2) poor wind and solar resources in the first half of the year resulted in a decrease in wind utilization hours from 129 to 1,223 hours year-on-year, and a decrease in solar utilization hours from 27 to 705 hours year-on-year. In addition, CHINA RES POWER had a total wind power and photovoltaic capacity under construction of 7.532 and 8.011 million kilowatts, respectively, in the first half of 2024. The company obtained renewable energy development and construction quotas totaling 3.83 million kilowatts, with wind and photovoltaic projects accounting for 2.155 and 1.675 million kilowatts, respectively. The company plans to add 40 million kilowatts of renewable energy capacity during the 14th Five-Year Plan period, with plans to add 10 million kilowatts of wind and solar power capacity in 2024. In the first half of 2024, the company added wind and solar power capacity totaling 930,000 kilowatts, and a large number of projects are expected to be connected to the grid in the second half of 2024.