Anxin International: CHINA RES POWER (00836) expects to achieve an additional installed capacity of 10GW this year. It is recommended for investors to seize the opportunity of low positioning.

Guotai Junan International released a research report stating that CHINA RES POWER (00836) saw a 38.9% year-on-year increase in net profit to 9.36 billion Hong Kong dollars in the first half of 2024. The company will accelerate the installation of renewable energy in the second half of the year, aiming to achieve an additional 10GW of installed capacity for the entire year and striving to meet the target of adding 40GW of renewable energy capacity during the "14th Five-Year Plan" period. In 2024, the company's renewable energy business installation will accelerate, and the profitability of its thermal power business will further increase. The bank expects the company to maintain a dividend payout ratio of 40%. According to consensus forecasts, CHINA RES POWER's net profit will reach 14.67 billion Hong Kong dollars in 2024. The current valuation corresponds to a PE ratio of 6.0 times in 2024, with an expected dividend payout ratio of 40% and a dividend yield of 6.5%. The bank recommends investors to buy on dips. The bank believes that with the improvement in the company's performance and high dividend yield, China Resources New Energy may be spun off and listed on the A-share market, making the current stock price have room for growth. The bank recommends investors to seize the investment opportunities in CHINA RES POWER. Guotai Junan International's main points are as follows: - CHINA RES POWER's net profit increased by 38.9% in the first half of 2024. - In the first half of 2024, the company's revenue remained flat year-on-year at 51.12 billion Hong Kong dollars, operating profit increased by 26.4% to 13.27 billion Hong Kong dollars, and net profit increased by 38.9% to 9.36 billion Hong Kong dollars year-on-year. Excluding exchange gain or loss, impairment of assets, and gains from acquiring subsidiaries, the core net profit attributable to shareholders increased by 23.8% to 8.27 billion Hong Kong dollars year-on-year. EPS increased by 39.3% to 1.95 Hong Kong dollars year-on-year. The company's performance grew rapidly, mainly due to a 10.6% decline in the benchmark coal price for coal-fired power plants, leading to a substantial increase in profitability in the thermal power business; the company acquired the Guangxi Hezhou thermal power project, yielding a one-time benefit of 876 million Hong Kong dollars. The company's interim dividend per share was 0.455 Hong Kong dollars, with an interim dividend payout ratio of 23.3% and an interim dividend yield of 2.44%. - Lower fuel costs led to a significant improvement in the profitability of the thermal power business. - During the period, the revenue of the thermal power sector decreased by 2.8% year-on-year to 37.97 billion Hong Kong dollars, with core profit of 2.71 billion Hong Kong dollars, a 274% year-on-year increase. The thermal power business's electricity sales volume increased by 3.3% year-on-year to 71.4 billion kWh, with 99.1% of the electricity traded in the market. The average on-grid electricity price of coal-fired power plants decreased by 3% year-on-year to 416.7 RMB/MWh. Fuel costs dropped significantly by 11%, primarily due to a 10.6% decrease in the benchmark coal price for coal-fired power plants to 934.6 RMB/ton and a 10.7% decrease in the unit fuel cost for thermal power plants to 276.5 RMB/MWh. By the end of last year, the company had signed long-term electricity trading contracts for 2024, with an average price increase of over 18% compared to the benchmark, accounting for approximately 80% of the electricity sold. The current market coal prices are fluctuating at a low level. It is expected that the profitability of the thermal power sector will significantly improve year-on-year in 2024. - Wind resources declined year-on-year, leading to a slight decrease in the core profit of the renewable energy segment. - The revenue of the renewable energy sector increased by 5.8% year-on-year to 13.15 billion Hong Kong dollars, with the core profit decreasing by 6.7% year-on-year to 5.56 billion Hong Kong dollars. The company's wind power electricity sales volume increased by 6.9% year-on-year to 22.4 billion kWh. However, in the first half of the year, wind resources declined year-on-year, with the curtailment rate of wind power increasing by 2 percentage points to 4%, and the hours of wind power utilization decreasing by 9.5% year-on-year to 1,223 hours, which is still higher than the national average of 889 hours. The decline in wind resources leading to reduced hours of wind power utilization is the main reason for the slight decrease in the core profit of the segment. The wind power electricity price decreased by 1.9% year-on-year to 445.6 RMB/MWh. The sales volume of photovoltaic power increased by 204.9% year-on-year to 3.1 billion kWh. The hours of photovoltaic utilization decreased by 3.7% year-on-year to 705 hours, higher than the national average of 879 hours. The sales volume of photovoltaic power accounts for a small proportion of the company's total electricity sales. - The target for new energy installation in 2024 is 10GW. - By the end of June 2024, the company's operational installed capacity reached 80.3GW, with an equity-installed capacity of 62.8GW, of which thermal power accounted for 38GW, or 60.7%, and wind, photovoltaic, and hydropower project equity installed capacity accounted for 24.7GW, or 39.3%. In the first half of 2024, the company added 2.1GW of renewable energy installed capacity. The company has 7.5GW of wind power and 8.0GW of photovoltaic power under construction. The bank expects the company to achieve its target of adding 10GW of renewable energy installed capacity in 2024. According to the company's plan, during the "14th Five-Year Plan" period, efforts will be made to expand new energy installation, aiming to add 40GW of renewable energy installed capacity, with renewable energy accounting for over 50% of the total installed capacity by the end of the "14th Five-Year Plan" period. It is expected that the company's grid-connected renewable energy capacity will accelerate in 2024-25, providing a sustained driving force for the company's future performance growth. - Risk Warning: Wind resources lower than expected; installation growth lower than expected; electricity demand lower than expected; financial costs higher than expected.