LONGYUAN POWER(00916.HK)：SHORT-TERM PRESSURE ON WIND;EYE ON LONG-TERM GROWTH POTENTIAL-格隆汇

机构：国泰君安国际
研究员：Peter Shao

Maintain "Buy": Given Longyuan Power's ("LYP", or the "Company") abundant project reserve and long-term growth potential, we maintain our 2024-2026 EPS estimates of RMB0.95/ RMB1.13/ RMB1.28, respectively.
Our TP is currently HK$7.75, based on 7.5x 2024 PER.
1Q2024 results in line: LYP reported 1Q2024 revenue of RMB9.88 bn, up 0.1% yoy, and shareholders' profit of RMB2.39 bn, up 2.5% yoy (based on the Chinese Accounting Standards).
Growth in 1Q2024 results was primarily driven by an increase in investment income. In 1Q2024, LYP added 562 MW of new capacity, including 26 MW of wind and 536 MW of solar. Generation was 21.2 GWh in 1Q2024, up 8.3% yoy. LYP's gross margin in 1Q2024 was 39.9%, down 0.1 ppts yoy. Net profit during the quarter was RMB2.66 bn, up 1.2% yoy. We think LYP's earnings growth in 1Q2024 was primarily driven by an increase in investment income. During the quarter, investment income was RMB70 mn, representing an increase of RMB140 mn yoy.
Decline in wind speed and tariffs weighed on short-term results, while long-term growth outlook remains solid. While capacity continued to grow, LYP's 1Q2024 wind generation was only up by 1.4% yoy to 17 GWh, dragged by decline in lower utilisation hours during the quarter (down 14 hours yoy). In 1Q2024, revenue from wind power was RMB7.84 bn, down 4.7% yoy. We believe the decline was largely due to lower wind tariffs as a result of increased power trading activities. We remain positive on LYP's long-term growth outlook, especially given the potential of wind repowering. LYP also enjoys an abundant project reserve (in 2023, LYP obtained new project reserve of 54 GW and new development quota of 23 GW).
Risks: Delay in project rollout, lower-than-expected tariffs for renewables.