龙源电力(0916.HK):Buy,TP HK$7.90

机构:花旗银行

评级:买入

目标价:HK$7.90 

Summary — We reiterate our Buy rating on Longyuan for (i) decent gross generation in Sept +11.2% yoy with wind farm utilization +8.0% yoy; (ii) solid 3Q18 results to be reported on 30 Oct (Tue) forecasting with net profit +15% yoy; Citi will host an investor conference call with management at 5:30pm on that day; and (iii) positive government policy catalysts in 4Q18E, comprising (i) tariff of existing wind farms without cut from replacement of tariff subsidy by green certificates, with any revenue shortfall to be compensated; and (ii) receipt of tariff subsidy from renewable energy fund in 4Q18E. Its 9.4x 2019E PER and 0.9x PB looks attractive; we assume the PB possible to reach 1.2x with reference to its 10.3% ROE.

Decent generation growth in Sept — Longyuan’s gross generation was +11.22% yoy to 3.60M MWh in Sept, including (i) +14.03% yoy to 2.89M MWh from wind farms driven by new capacity and utilization rise; (ii) +0.75% yoy to 0.66M MWh from coal fired plants with steady demand; as well as (iii) +5.7% yoy to 0.048M MWh from others. Its gross generation was +11.85% yoy to 36.459M MWh in 9M18, with such growth rate shy of our assumption to +14.7% yoy in 2018E. For every 1% generation below our estimate, its 2018E net profit will -1.8% from our base case.

Wind farm utilization rise in Sept — We calculate that average utilization of Longyuan’s wind farms was +8.0% yoy to 157 hours in Sept, boosted by higher wind speed and less grid curtailment (-1.6ppts yoy to 5.1%) in the month. We calculate average utilization of its wind farms +13.4% yoy to 1,622 hours in 9M18, comprising +14.7% yoy to 1,181 hours in 1H18 reported by the company. 

Forecasting net profit to +15% yoy in 3Q18E — We estimate Longyuan’s net profit to +15% yoy to Rmb453m in 3Q18E, factoring output growth with wind farm utilization rise (+9.3% yoy to 441 hours) and mild tariff cut from more sales mix via competitive bids. Citi will host Longyuan’s post 3Q18 results call with management at 5:30pm on that day. Please dial (852) 2112 1444; passcode is 4033030#.

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