Huaneng Hydropower (600025) Coverage Report for the First Time: One Belt, One Water Supply, Yunnan, Guangdong, Guangdong, and Western Power to the Greater Bay Area

Ping An View: With the Lancang River’s high-quality resources, the two major reservoirs are smooth and full: the development, operation and integration of hydropower resources in the Lancang River Basin and surrounding areas of Huaneng Hydropower’s main army.

Among domestic hydropower companies, the company’s installed hydropower capacity is second only to Yangtze Power, and its power generation is slightly lower than 四川耍耍网 SDIC’s third in the industry.

The company’s Xiaowan and Nuozhadu Longtou Reservoir’s two power stations have been adjusting capacity for many years. It can smooth out the output during the high and low seasons, increase production, and increase the price of on-grid electricity.

Units under construction have been put into production one after another, and fruitful results are in sight: the company started from Manwan, and rolling development fostered new growth points.

With the five major power stations in the upper reaches of the Lancang River in Yunnan in July 2019, the company’s installed capacity rankings increased by nearly 40% to 23.18 million kilowatts in 2014.

The utilization hours remained stable, and the increase in power generation and installed capacity was basically synchronized.

With the recovery of electricity demand in Yunnan Province and the expansion of power transmission from the west to the east, the on-grid tariffs for market-oriented trading power have started to rise; the five major power stations on the Lanshang clearly sent the planned on-grid tariffs for Guangdong’s power to zero.

300 yuan / kwh, further increase the price of electricity.

Based on Yunnan ‘s west-to-east power transmission, the power reform will deepen the volume and price: A small part of the company’s power generation is absorbed in Yunnan Province, and most of it is sent to Guangdong through three ultra-high-voltage lines in Chusui, Puqiao, and Xindong.

Both Yunnan and Guangdong provinces have conducted in-depth power reforms with high marketization and strong price discovery capabilities. With the supply and demand improving, the electricity and electricity prices have been steadily increased.

The three talents of the heavens, the earth and the earth merged together to reset the hydropower year: Affected by the El Ni?o event and the strong monsoon in the South China Sea, the hydropower output increased early in the first half of the year, and the margin difference was reduced without affecting revenue.

Investment suggestion: The company’s 19/20/21 EPS is expected to be 0.

31/0.

32/0.

34 yuan, corresponding to the closing price of 14 on August 30 respectively.

8/14.

3/13.

6 times.

Comparing the relative estimates of other comparable companies and the absolute estimation level of the company, a reasonable interval is 4.

84-4.

99 yuan / share, corresponding to 15 in 2019 PE.

6-16.

1 times.

The company sits on the Lancang River with high-quality resources, and its two years of regulating reservoirs have been gradually enriched, and its ability is excellent; based on the market layout of Yunnan ‘s western power to east to Guangdong, the company ‘s electricity and electricity prices will benefit from the improvement of the supply and demand pattern of both provinces and the power marketDeepening reform.

In the first half of the year, the trend of hydropower resumed, giving the company an estimate of 16 times PE in 2019, corresponding to a target price of 4.

96 yuan, the first coverage given a “recommended” rating.

Risk reminders: 1. Water supply in the river basin: The company’s power stations are mainly located in the Lancang River basin. The uncertainty of water supply will have a significant impact on the company’s production and operating activities.

2. Electricity price reduction: The policy of lowering the sale price of electricity by downstream users may shift to the upstream electricity generation side, leading to a reduction in on-grid electricity prices; the advancement of the transformation of electricity reforms, the continuous expansion of the scale of electricity marketization transactions, may lower the average on-grid electricity prices.

3. Market Consumption: Domestic power demand has shown a state of greater than demand in recent years. The situation of loose power supply will continue in the short term, and power consumption is facing certain risks. The risk of water abandonment during the flood season still exists.

4. Policy adjustment: New policies may be introduced in the fields of finance and taxation, finance, capital market, power system, immigration and environmental protection, which will have a certain impact on the company’s operation and management.