Huaneng Hydropower (600025): High-quality large-scale hydropower profitability rebounds
The second largest hydropower company based in Yunnan is headquartered in Kunming, and went public at the end of 2017. Huaneng Group, a major shareholder, holds 50.
The company’s main business is hydropower, with the right to develop the basin of the mainstream of the Lancang River, with an installed capacity of 22,301 in 19Q1.
3MW, the second largest hydropower installed capacity in the country, 99% of which is hydropower, and mainly large hydropower stations.
The intensive commissioning of hydropower, power generation, and comprehensive electricity prices in the upper reaches of the Lancang River in Yunnan is expected to significantly increase the company’s initial commissioning of hydropower stations, which are mainly located in the middle and lower reaches of the Lancang River, other river basins in Yunnan Province, and Cambodia, Myanmar and other countries.
Since 2017, the company has intensively commissioned 5 hydropower stations in the upper reaches of the Lancang River in Yunnan, with a planned installed capacity of 5,630MW, which is equivalent to 25% of the company’s total installed capacity at that time.
The five upstream power stations are directly sent to Shenzhen through the northwestern Yunnan DC. It is estimated that the electricity price may be more than 30% higher than the company’s existing unit electricity price, and the market share of electricity is relatively small, which is expected to significantly increase the company’s comprehensive electricity price.
The existing units benefit from the power transmission from the west to the east and the improvement of supply and demand in Yunnan Province. Electricity prices are expected to bottom out. About 30% of our restructured companies participate in market-based transactions. The transaction electricity prices are closely related to Guangdong and Yunnan’s power supply and demand. Of these, about 9% participate in theThe power transmission from east to east will be settled, and the rest will participate in the transactions in Yunnan Province.
Electricity marketization transactions since 2015 have caused the company’s electricity prices to fall year after year.
In the past 1-2 years, with the stabilization and recovery of power demand, clean energy transformation, thermal power generation to generate electricity, and optimization of trading rules, the supply and demand of Yunnan and Guangdong have improved and narrowed. The company’s comprehensive tax-free electricity price has increased by 1 in 2018.
5 minutes / kWh to 0.
RMB 191 / kWh.
The company’s current electricity price and ROE are still significantly lower than those of the hydropower industry. The repair of electricity prices for subsequent existing projects and the high electricity prices of new upstream units will continue to drive profitability.
As the mobile phone group is nearing completion of operation and the release of free cash flow is imminent in 2019, all of the company’s units under construction will be fully operational.
The company’s capital expenditure in 2019 will drop by 60 ppm to 39.
1.7 billion, a drop equivalent to the total dividends for 2018.
We expect that the company’s free cash flow will be significantly released, which will drive down the asset-liability ratio, increase dividends, and open up potential for overall mergers and acquisitions.
High-quality large hydropower is estimated to be slightly higher than its peers. Maintaining an overweight rating, we expect the company’s operating income for 2019-2021 to be 185.
04 billion, net profit attributable to mother 38.
97 ppm, corresponding to a dynamic PE of 19.
2x / 15.
4x / 15.
Comprehensive relative and absolute estimation results, update the company’s reasonable 深圳spa会所 estimation interval for the next 12 months to 4.
96 yuan (4 in the previous report.
04 yuan), corresponding to the current sustainable 17-22% space, maintaining the “overweight” level.
Risk warning: electricity demand forecast, electricity price is not up to expectations, and incoming water changes dramatically