20231101-招银国际-龙源电力-001289.SZ-Lead_the_way_as_the_renewable_frontrunner_23页_1mb

Summary of China Longyuan Power (001289 CH) Analyst Report

Analyst Recommendation and Valuation

• BUY rating with a target price of RMB23.28, offering a 14% upside from the current price of RMB20.41.
• Based on a target FY2023E P/E ratio of 24.0x, attractive valuation driven by rapid growth in wind and solar power installations and strong revenue potential.

Financial Performance Highlights

• Revenue in Q1-Q3 2023 decreased 7.00% YoY to RMB28.097 billion, but net attributable profit surged 18.95% YoY to RMB6.379 billion due to increased new wind and solar capacity and lower operating costs.
• Wind power revenue grew 3.53% YoY, while solar power drove a 68.48% YoY increase in other renewable segments.
• Full-year 2023E financial projections: Revenue is expected to reach RMB42.649 billion (7.0% YoY increase), with net profit at RMB8.110 billion (59% YoY growth).

Growth Drivers and Strategic Initiatives

• Strong focus on renewable energy: Plan to add 30 GW of new capacity by 2025, supported by policy benefits like the "substitution of large for small" wind turbine upgrade program, which enhances long-term earnings.
• Abundant project reserves: Targeted to reach cumulative new energy installed capacity of 50 GW by 2025, with solar power showing highest growth.
• Green electricity and certificate trading provide additional revenue streams, contributing RMB400 million in Q1-Q3 2023.

Risks and Challenges

• Declining on-grid tariffs (e.g., wind power tariff fell 3.5% YoY in 1H2023) and potential impairment risks could pressure margins.
• Revenue decline in thermal power segment due to weak demand and lower curtailment.

Company Background

• Operated by China Energy, a key SOE in energy, with CLY being a global leader in wind power and renewable energy.
• Total controlled capacity of 31 GW as of 2023, with wind power accounting for 84.2% of it.

Outlook and Investment Thesis

• Positive future outlook from China's national energy policies: Wind power installation expected to grow at 17% CAGR to 620 GW by 2025, with solar power at similar rapid growth rates.
• Upward momentum in renewable energy generation, benefiting from technological innovations and policy support, driving sustained growth and shareholder value.