Key points of investment
ORIX took a strong stake as a second shareholder, focusing on long-term strategic cooperation. We believe that the introduction of ORIX is a major benefit to the company's fundamentals, or an inflection point in the company's fundamentals: (1) introducing two shareholders with rich experience in photovoltaic power plant development in Japan and around the world, and later cooperation in the photovoltaic business had great room for imagination; (2) solved the company's financial pressure. The company raised HK$1,259 million through this issue, and will also receive an additional HK$2 billion in syndicated loans/bond funds, which will greatly ease the financial pressure on the company's financial redemption; (3) the company will greatly ease concerns about the dilution of the company's equity in the market after returning a large number of convertible bonds, Particularly Considering that individual convertible bonds have higher interest costs and higher exchange prices; (4) the company was limited by financial pressure in the first half of this year and the pace of power plant acquisitions slowed down, and after the financial situation improved, it is expected that the power plant acquisition progress will be accelerated again in the second half of the year and next year, further expanding the scale of operation.
Power generation increased rapidly in the third quarter. Benefiting from the contribution of new installations, the company's photovoltaic power generation capacity grew rapidly in the third quarter, growing at a rate of 82.2%. The cumulative year-on-year increase in the first three quarters was 62.3%, and is expected to increase by about 70% year-on-year for the whole year. With the rapid increase in installed capacity, the company's power generation capacity is expected to continue to grow rapidly in the future, driving growth on the revenue side.
Mergers and acquisitions of power plants are speeding up. The company's new increase in installed capacity in the first half of the year was only 20 MW, but recently the company's mergers and acquisitions accelerated markedly in the second half of the year. After the mergers and acquisitions of the UK's 6 power plants totaling 82.6 MW and the Shandong Power Station's 40 MW mergers and acquisitions were completed, the company's grid-connected installed capacity will reach 1,174 MW, and it is expected that the company's other mergers and acquisitions will continue to be implemented throughout the year, continuing to help the company's power generation grow rapidly.
Our view: United Photovoltaics (686.HK) is a clean energy operating listing platform under the China Merchants Bureau, a major central enterprise. Relying on strong shareholder support, the company used flexible and diverse financing methods to rapidly increase the installed capacity of photovoltaics through mergers, acquisitions, and self-construction methods, etc., and the amount of feed-in electricity grew rapidly. ORIX, a two-shareholder, was recently introduced. Future strategic cooperation between ORIX and the company is worth looking forward to, and the company is expected to use the proceeds from the raised capital to repay exchangeable bonds in advance, reducing the pressure on debt and the upward pressure on the company's stock prices. It is expected that the company's installed capacity and feed-in power supply will continue to grow rapidly in the future, while increasing efforts to build its own power plants. According to Wind's consistent expectations, the company predicts EPS of 0.05 or 0.07 yuan in 2016 and 2017, corresponding to the current stock price of HK$0.70 P/E of 14 or 10 times, while the static P/E is 7 times. The company's valuation is not high. Investors are advised to pay close attention.
Risk warning: Power plant project acquisition risk, power plant operation risk.
