20230516-招银国际-新天绿色能源-00956.HK-Gas_and_new_energy_go_hand_in_hand_22页_2mb

Summary of China Suntien (956 HK) Equity Research Report

Key Recommendations

• CMB International Global Markets assigns a BUY rating with a target price of HK$4.57 for the stock, reflecting a 38% upside potential from the current price of HK$3.31.

Company Overview

China Suntien is a major entity in Hebei Province's new energy and gas sectors, operating through two main segments: gas and renewable power generation. Founded in 2010 by HECIG (a state-owned entity), it was listed on the SEHK and SSE. As of 2022, HECIG holds the largest stake (49.17%), benefiting from resources and platform support.

Operational Performance

• 1Q23 Data: Wind power generation rose 7.13% YoY to 4.016 billion kWh, solar power rebounded with a 10% YoY growth. Natural gas sales volume increased by 2.01% YoY in 2022, and wholesale gas sales are expected to rebound to 8.27% YoY in 2023.
• 2022 Highlights: Revenue reached RMB18.56 billion (up 15% YoY), with wind and solar generation growing modestly due to weaker wind resources and lower subsidy-driven installations. New wind power capacity additions slowed from 2021 levels.
• 2023 Projections: Anticipates installing up to 480MW of wind power capacity and maintaining steady solar growth. The Tangshan LNG Phase I project is expected to commence operations in 2023, boosting gas supply and margins.

Financials and Valuation

• Current Valuation: Trades at 0.57x-0.53x PB for FY23/FY24E, below peer averages, offering a 6.54% yield for FY23E.
• Financial Trends: Revenue growth maintained a strong CAGR (16.96% 2018-2021), but net profit saw variable growth due to external factors like higher gas costs and epidemic impacts in 2022. Earnings improved in 2021 with a 43% YoY jump driven by higher utilization hours and gas sales.
• Target Price: SOTP-based TP of HK$4.57, based on a 0.8x FY23E PB for the renewable segment and 10x FY23E PE for the gas segment.

Industry Outlook

• New Energy Growth: Driven by national energy policies supporting wind and solar installations, with China aiming for 620GW wind and 652GW solar capacity by 2025. Hebei Province's targets include adding 20.26GW wind and 32.10GW solar capacity.
• Gas Sector: Expected to return to positive growth in 2023 due to declining gas prices and infrastructure investments, such as the Tangshan LNG project, which enhances supply and margins.
• Wind Power Drivers: Lower upstream turbine costs (prices fell 73% YoY) increase project IRR, raising investment willingness. Better utilization hours in Hebei Province (2,485 hours vs. national average) provide a competitive edge.

Conclusion

The report emphasizes favorable growth prospects for both gas and new energy segments, supported by policy, cost efficiencies, and infrastructure developments. The BUY rating is underpinned by attractive valuation metrics, strong management guidance, and positive industry tailwinds, offsetting potential risks like slower subsidy implementation. Short-term data shows resilience, with a focus on renewable energy advancements.