Positive Profit Alert and listing of A-shares
- Expects FY21 EPS to rise 25-35% y-o-y, within our expectations
- Total FY21 power generation up 19%, helped by capacity growth and higher wind speeds
- SZSE A-share listing on Jan 24th
- Reiterate BUY with HK$21 TP
China Longyuan Power (916.HK) announced positive profit alert. The company anticipates FY21 EPS to grow 25%-35% y-o-y to Rmb 0.73 to 0.79/sh, within our expectations. Our most recent FY21 EPS estimate of Rmb0.79/sh is near the high end of this range.
The positive profit alert was mainly attributable to a 19.26% y-o-y increase in electricity generation in 2021. Broken down by type, wind, coal, and other renewables saw 17.44%, 19.28% and 246.67% y-o-y electricity generation growth in 2021. Within the wind power segment, increased installed capacity, higher wind speeds, and technical improvements all contributed to growth in power generation.
Regarding CLYP’s planned A-share listing, the company announced it will list on the main board of the Shenzhen Stock Exchange SZSE on Jan 24th, 2021. The new ticker symbol will be 001289.CH. Pingzhuang Energy (000780.CH) which is currently suspended, will be delisted on Jan 24th.
This multi-leg transaction involves 3 steps.
- The merger and absorption of Pingzhuang Energy by CLYP and CLYP’s A-share listing
- Pingzhuang Energy to sell certain assets to its parent Pingzhuang Coal Group for Rmb3.44bn.
- CLYP to acquire 1.99GW of wind generation assets from parent CHN Energy for Rmb5.77bn.
CLYP’s A-share listing marks the conclusion of a major step in the multi-leg transaction. The three legs of the transaction are inter-conditional upon each other, failing any of which, the other two transactions will not be implemented.
The A-share listing should help CLYP diversify its financing channels and help support its capacity growth plans. According to pro-forma financial information in CLYP’s filings, gearing as measured by the liability-to asset-ratio should increase slightly to 62.8% after the transaction, compared to 60.5% before the transaction. Looking forward, CLYP currently has an installation target of 30GW of renewable capacity by 2025, consisting of c.40-50% of wind and c.50-60% of solar.
We reiterate BUY on CLYP with TP of HK$21. The company has a visible capacity growth plan. Lower wind turbine prices could help drive CAPEX savings for CLYP’s, which should lead to higher project IRRs. Policy support for wind farm upgrades should also help driver incremental revenue growth.