The H1 net profit of CGN New Energy increased significantly by 55% in 2021. CGN New Energy announced its 2021H1 results last night, which was consistent with the previous Yingxi announcement. In the first half of the year, the company's revenue of $800 million increased by 34.3% compared with the same period last year. Operating profit surged 61.4% to $250 million. EBITDA rose 54.3 per cent year-on-year to $380 million. The company's net profit rose 55.6 per cent year-on-year to $160 million. EPS grew 55.6% year-on-year to 3.8 cents. During this period, the company's revenue and profits increased significantly, mainly due to the substantial increase in wind and solar power generation. More wind and solar power projects were put into production at the end of 2020, and the power generation of both wind power and solar power projects also increased. The company's profitability improved, EBITDA profit margin rose 6 percentage points year-on-year to 47.4%, and net profit margin rose 4 percentage points to 22.0% year-on-year. The increase in profitability is mainly due to a further increase in the proportion of revenue contributed by wind and solar power businesses with high profit margins.

The installed capacity of new rights and interests continues to grow. In the first half of the year, the company added new grid-connected rights and interests to 321.2MW, nearly twice as much as in the same period last year. Among them, new installed 173.9MW for wind power, new installed 37.8MW for solar power, and new installed 109.5MW for biomass power generation. The cumulative rights and interests of the company have reached 7723MW. The proportion of wind installed capacity continued to grow steadily to 55.2%, an increase of 10 percentage points over the middle of last year. Based on the number of projects currently under construction and the progress of large-scale projects, we expect the company to install new grid-connected rights and interests to reach the scale of 1GW this year.

There has been a substantial increase in wind power generation, promoting the rapid growth of the company's overall performance. In the first half of the year, the company's electricity generation was 9233.5 gigawatt hours, an increase of 34.6 percent over the same period last year, equivalent to 67 percent for the whole of last year. Among them, the power generation of wind power projects increased by 70.2 percent, that of solar projects increased by 24.5 percent, and that of wind power projects accounted for nearly 50 percent, up further from 42 percent last year. Wind power generation has increased significantly, due to the rapid increase in wind power installation and the increase in the number of hours of wind power project utilization. Before the end of last year, the company concentrated on a number of onshore wind power projects. In the first half of last year, the company installed wind power rights and interests about 2GW. By the first half of this year, wind power rights and interests installed more than 3.1GW, an increase of more than 50%. In the first half of the year, the utilization hours of wind power projects reached 1196 hours, an increase of 19% over the same period last year. The company's new wind power projects are mainly located in Henan, Zhejiang, Jiangxi and other provinces, the average electricity price is higher, the average electricity price of wind power projects has been raised to 0.53 yuan / kWh. In the first half of this year, revenue from wind power projects rose 89 per cent year-on-year to $240 million, while operating profit rose 111.3 per cent year-on-year to $169 million. The wind power project contributes 30% of the company's income and 67% of the operating profit. Wind power projects are the main source of profit for the company. According to the company announcement, the power generation of the company's wind power projects increased by 75% from January to July compared with the same period last year. We expect that the increase in wind power generation for the whole year will promote the rapid growth of the company's performance.

Offshore wind power project is expected to be the company's new performance growth point. The company continues to carry out technical reserves and resource acquisition for offshore wind power projects, especially in Guangdong Province, where the subsidy policy for offshore wind power has been clearly defined.

We expect that in the future, with the advantage of technology and resource reserves, offshore wind power will become a new performance growth point of the company. The company's Zhejiang Shengsi project 282MW and Jiangsu Rudong project 300MW are being promoted according to the construction plan.

Adjust the portfolio to increase the proportion of new energy installed. The company continues to promote the divestiture of Korean project assets and the asset injection of CGN's wind power projects, and the company's asset portfolio will gradually focus on new energy. The company is arranging the way of asset integration, pricing and so on. We expect the company to gradually complete the project asset integration this year and next year.

Investment advice: the company's net profit in 2020 was $162 million, while that of 2020H1 was $162 million, up 55% from a year earlier. According to Bloomberg's forecast, the company's net profit in 2021 will grow 22% year-on-year, and the stock price is now equivalent to 2021 PE11.8 times. We think there is room for valuation to rise and recommend investors to pay attention to it.

Risk tips: the divestiture speed of South Korean assets is slower than expected; the injection rate of new energy power generation projects of CGN is slower than expected; the recovery rate of subsidies is slower than expected; the financial cost is higher than expected; and the utilization hours of power plants are lower than expected.