- RE-ITERATE Buy Entry – 15.2 Target – 17.0 Stop Loss – 14.5
- China Longyuan Power Group Corp Ltd is a China-based company mainly engaged in power sales business. The company operates three segments. Wind Power segment constructs, manages and operates wind power plants and produces electricity and sells it to grid companies. Coal Power segment constructs, manages and operates coal-fired power plants and produces electricity and sells it to power grid companies. All Others segment is mainly engaged in manufacturing and selling power generation equipment, providing consulting services, providing maintenance and training services to wind power enterprises and other renewable energy power generation and sales.
- Growth of Wind power remained upbeat. According to the National Energy Administration, the total national installed capacity grew by 7.9% YoY to 2,420 GW in May, out of which, wind power installed capacity grew by 17.6% YoY to 340 GW. In 5M22, wind power installed capacity jumped by 39.1% YoY to 10.8 GW.
- Favourable policy support. In June 2022, the National Development and Reform Commission and other nine administrations co-issued the 14-Five-Year plan of renewable energy development. China targets renewables to supply 33% of national power consumption by 2025, and for non-hydro renewables to contribute 18%; the two consumption quota targets are 4.3 ppts and 3.6 ppts higher than 2021 levels, respectively. Wind power generation will double by 2025. Meanwhile, the Ministry of Finance announced the subsidies for renewable energy projects, and of which wind power and solar projects were allocated RMB1.47bn RMB1.25bn respectively.
- Operation updates in May. The power generation on a consolidated basis grew by 5.06% YoY to 6,003.6 GWh. Wind power generation increased by 5.42% YoY, coal power generation decreased by 8.75% YoY and other renewable energy power generation increased by 124.50% YoY. In 5M22, total power generation grew by 7.71% YoY to 30,821.4 GWh. Wind power generation increased by 8.02%YoY, coal power generation decreased by 0.01% YoY, and other renewable energy power increased by 81.09% YoY.
- The updated market consensus of the EPS growth in FY22/23 is 19.1%/18.6% YoY respectively, which translates to 14.6x/12.3x forward PE. The current PER is 17.3x. Bloomberg consensus average 12-month target price is HK$22.37.