Main points of investment

Established new energy operators have accumulated strength and have obvious advantages in obtaining resources:

The company is one of the earliest electric power enterprises engaged in new energy development in China. As of 2022H1, the company's cumulative holding installed capacity is about 13.18GW, of which wind power holding capacity is about 12.1GW and photovoltaic holding capacity is about 1.08GW. The target for 2022 is to add new energy installed 2GW, and most of them are expected to be concentrated in production in the fourth quarter. The company rises abruptly based on accumulated strength, actively arranges the scenic large base project, the first batch of scenery obtains 9.13GW, the second batch obtains 2.35GW, the project reserve is abundant, the follow-up installation is expected to speed up.

The market prospect of "replacing the small with the big" in the old wind farm is broad:

The state encourages wind farms that have been connected to the grid for more than 15 years to carry out transformation, upgrading and decommission. it is clear that the grid electricity price subsidy of the wind farm transformation and upgrading project will be implemented in accordance with the electricity price policy of the original project, and the rest of the electricity will be implemented in accordance with the electricity price policy of the year in which the project is re-filed. It is expected that by the end of the 14th five-year Plan, the wind power capacity with 15 years of operation will exceed 40GW. If the "large for small" renewal transformation is carried out and the capacity is conservatively expanded at 1:2, the wind farm stock renewal capacity will reach 80GW, and the market prospect is broad.

The company occupies the high-quality wind resources in the "three north" areas and fully benefits from the policy dividend:

It is estimated that in the case of larger unit capacity and larger wind field scale, the project income of capacity expansion and update will be greatly increased. As a veteran wind power operator, the company occupies high-quality wind resources in the "three north" areas and will fully benefit from the dividend of the technical reform policy of "replacing the small with the big". At present, the total capacity of "replacing the small with the big" is about 3.3GW, among which there are nearly 1100 fans with the capacity of 1.1 GW less than 1MW under 1.5MW and running for more than 10 years. It is expected that after the transformation of the company's old fan, the installed capacity will increase several times, and the wind farm will benefit from the high wind speed, and the project IRR is expected to increase significantly.

For the first time, it covers a "buy" rating with a target price of HK $2.70:

Combined with earnings growth and industry valuation, we give the company a target price of HK $2.70, equivalent to 12 times and 10 times PE in 2022 and 2023, with 38 per cent room for improvement from the current price, covering the "buy" rating for the first time.