20160607-大华继显-Regional_Morning_Notes_23页_2mb
报告摘要
Regional Morning Notes Summary
Core Content
This document provides a detailed analysis of the renewable energy sector in China and highlights key investment opportunities, assumptions, and corporate events across various regions and sectors. It outlines the expected trajectory of the wind power industry, including the anticipated achievement of wind-coal power tariff parity by 2020, the performance of specific companies, and the valuation metrics of Concord New Energy (CNE).
Main Points
Wind Power Industry Outlook
- Tariff Parity: The wind power industry is expected to reach tariff parity with coal power by 2020, driven by technical upgrades and curtailment reduction.
- Efficiency Gains: Wind power efficiency is forecasted to improve by 5% annually, leading to a cumulative 25-30% improvement by 2020.
- Curtailment Reduction: Curtailment is expected to drop to 5% in 2020, up from 15% in 2015, due to policy changes and infrastructure improvements.
- Utilisation Hours: With the average utilisation hours expected to rise from 1,728 in 2015 to 4,700 in 2020, this could reduce the tariff by about 13 Rmb cents/kWh.
Key Companies
- Longyuan Power (916 HK): Maintained as an OVERWEIGHT pick, with a BUY recommendation. The company is expected to benefit from the guaranteed purchase policy and improved utilisation.
- Concord New Energy (182 HK): Initiated coverage with a BUY recommendation. It is expected to grow at 30% earnings CAGR from 2016 to 2018 due to its strong capacity expansion and improved asset quality.
Key Information
Market Performance
- Indices: The document includes performance data for various global and regional indices such as DJIA, S&P 500, FTSE 100, AS30, CSI 300, etc.
- Tariff Parity: The average feed-in tariff (FiT) for wind is Rmb0.55/kWh in 2016, which is 53% higher than for coal-fired IPPs.
- Earnings Growth: The renewable energy sector is expected to see a 30% CAGR in earnings from 2016 to 2018, with CNE leading in growth potential.
Corporate Events
- Roadshows and Presentations: Several corporate events are scheduled for June 2016, including the Meidong Auto Roadshow in the UK, the Singapore Strategy for 2H16 in Taipei, and others.
- Company Updates: Geely Auto saw a 19% YoY sales growth in May 2016, and Guangzhou Automobile Group reported a 20% YoY sales increase.
Sector Analysis
China Renewable Energy Sector
- Wind Power: The key focus is on the wind power sector, with the expectation of tariff parity by 2020.
- Technical Upgrades: The central government has released long-term guidelines for technical improvements in wind equipment, targeting 10MW turbines.
- Geographical Optimisation: Wind farms are expected to be located in Category IV regions, which offer higher FiTs and better utilisation.
- Finance Cost Savings: With the reduction of debt and interest costs, the ROE and cash flow of wind projects are expected to triple after 10 years.
Investment Recommendations
OVERWEIGHT
- Longyuan Power: Maintained as an OVERWEIGHT pick, with a BUY recommendation. Target price: HK$8.30.
- Concord New Energy: Initiated coverage with a BUY recommendation. Target price: HK$0.70, implying a 62.8% upside.
BUY
- CNE: The company is expected to benefit from the transformation into a renewable utility, with improved earnings visibility and quality.
- Key Drivers: Strong capacity growth, better geographical exposure, and margin improvements.
Valuation and Financials
Concord New Energy (CNE)
- Financial Performance: EBITDA and net profit are projected to grow significantly from 2015 to 2018.
- Valuation Metrics:
- 2017F P/B: 0.5x
- 2017F PE: 4.3x
- Target Price: HK$0.70, indicating a 62.8% price upside.
- DCF Valuation: The company is valued using a DCF approach with a WACC of 10.7% and a terminal growth rate of 1%.
Risks and Opportunities
Risks
- Downside Risks: Slower-than-expected progress in the implementation of the Renewable Portfolio Standard (RPS) and ultra-high-voltage (UHV) line construction.
- Upside Risks: More stringent environmental control standards may lead to increased demand for renewable energy.
Opportunities
- Tariff Parity: Achievement of wind-coal tariff parity will reduce reliance on government subsidies.
- Environmental Trends: Growing environmental concerns are expected to increase demand for renewable energy.
- Capacity Expansion: Continued capacity growth in wind and solar power will boost earnings and improve margins.
Summary Table
| Company | Ticker | Recommendation | Target Price (HK$) | Upside (%) |
|---|---|---|---|---|
| Longyuan Power | 916 HK | BUY | 8.30 | - |
| Concord New Energy | 182 HK | BUY | 0.70 | 62.8 |
Conclusion
The renewable energy sector in China is on a positive trajectory, with wind power expected to achieve tariff parity with coal by 2020. This will reduce the need for government subsidies and improve returns for operators. Concord New Energy is highlighted as a top pick due to its strong capacity growth and transformation into a renewable utility, with a BUY recommendation and a significant price upside. The document also outlines key corporate events and financial metrics, providing a comprehensive view for investors.
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