Main points of investment

Speed up the transformation of new energy, and plan to add 8.34GW in 2021:

During the 14th five-year Plan period, the company will speed up the transformation of new energy, and plans to add wind power and photovoltaic installed 8GW every year. By the end of 2025, the company will achieve the target of wind power installed 29GW (CAGR is 29%) and photovoltaic installed 26GW (CAGR is 59.6%). In 2021, the company plans to increase the production of new energy 8.34GW, of which wind power project is 5.58GW and photovoltaic project is 2.76GW. It is estimated that by the end of 2021, the company's renewable energy rights and interests installed capacity will reach 19GW.

The state has introduced a number of measures to ensure the supply of thermal coal to stabilize coal prices:

Recently, the National Development and Reform Commission and the Energy Bureau have set up special classes for the protection and supply of power coal, bringing the power plants that implement the differential coal storage system in the off-peak season into the key scope of protection, so as to ensure that the seven-day safe coal storage bottom line of the power plant is firmly maintained. When the available days of power coal inventory in the operation of the power plant is less than 7 days, the key guarantee and supply mechanism will be started immediately, and the relevant departments and key enterprises will focus on the coordination and guarantee of coal source, transport capacity and so on.

This policy is conducive to mobilizing and invigorating inventory resources. in the future, with the gradual improvement of stable coal supply and long-term price mechanisms such as medium-and long-term contracts, the ability of coal security will be significantly enhanced, which can alleviate the contradiction between the fluctuation of thermal coal demand and balanced coal production, and promote the continuous supply and price stability of thermal coal.

Liberalize the restrictions on the rise of electricity prices in many places to ease the pressure of rising coal prices:

Since 2021, coal prices have continued to rise, the thermal power industry is facing a large area of losses, lack of willingness to generate electricity, the electricity consumption of the whole society is rising, and the tense situation of power supply and demand is increasing. In order to ensure the stable development of the electricity consumption of the whole society and the thermal power industry, the state encourages the use of 10% benchmarking electricity prices to rise in various places.

Since July-August 2021, the governments of Inner Mongolia, Ningxia, Shanghai and other places have successively issued documents to allow the benchmark trading electricity price to rise by no more than 10%. Combined with market coal prices, it is expected that the feed-in price of coal and electricity can be increased by about 5-6 cents per kilowatt-hour. Rising electricity prices will help ease the pressure on coal-fired power companies to generate electricity and ensure power supply.

Give a buy rating, target price of HK $5.88:

We update the company's target price of HK $5.88, which is equivalent to 12 times and 11.4 times PE in 2021 and 2022. The target price has 49% room to rise from the current price.