Core ideas:
The company's net profit increased significantly in the first three quarters of 2018, and its performance in the third quarter was slightly better than expected. The company's main business income in the first three quarters of 2018 was 5.963 billion yuan, an increase of 22.6 percent over the same period last year, and its net profit was 905 million yuan, an increase of 168.8 percent over the same period last year. The high profit growth is mainly due to the substantial increase in wind power generation caused by the improvement of wind abandonment rate. The wind resources improved significantly in the third quarter, and the growth of power generation was better than expected, with a net loss of 41 million yuan, down 64.6 percent from the loss of 117 million yuan in the third quarter of 2017.
The power generation increased steadily, the abandonment rate continued to improve, and the number of hours was used to maintain the high level of the company's completed power generation 12915GWh in the first three quarters of 2018, an increase of 24.15 percent over the same period last year, of which wind power generation 12695GWh increased by 24.35 percent year-on-year, and other renewable energy generation 220.36GWh increased by 13.94 percent year-on-year, and the total power generation increased slightly more than expected. The average abandonment rate in the first three quarters of 2018 was 8.8%, down about 8.1 percentage points from the same period last year. We expect the company's abandonment rate to remain below 9% for the whole year and will continue to improve in the future. The average number of hours of wind power utilization in the first three quarters reached 1506 hours, an increase of 195 hours over the same period last year, and remained high.
The installed scale of new wind power has slowed down slightly, and it is expected to maintain steady growth in the next three years. Affected by the trend of tight subsidies and stricter environmental protection approval, we do not expect the company to expand the new scale in the future. The company did not install new machines in the third quarter, and the growth rate slowed down. We estimate that the company's new wind power installed capacity from 2018 to 2020 will be 500x600x600 megawatts respectively.
Profit Forecast and Investment rating
On October 31, 2018, Datang New Energy (1798.hk) closed at HK $0.96. We forecast that the EPS for 2018-2020 will be RMB 0.195 pesque 0.229RMB 0.256 respectively, and the latest closing price will be 4.36X/3.72X/3.32X corresponding to the price-to-earnings ratio, maintaining the "buy" rating.
Risk hint
Market transactions lead to the risk of decline in electricity prices, the risk of deterioration of wind conditions and power restriction rates, the uncertainty of new energy subsidies, the upward risk of interest rates on lending funds, and the risk of exchange rate fluctuations between the Hong Kong dollar and RMB.