The wind power generation capacity of Datang Renewable Energy increased 7.6% year-on-year to 5,219 gigawatt-hours in the second quarter of 2020, in line with our expectations. The estimated quarterly utilization hours of wind power fell slightly by 0.8% year over year to 547 hours. The company's cumulative wind power generation capacity in the first half of 2020 increased 7.8% year-on-year. The corresponding number of hours of wind power utilization is expected to be 1,165 hours, an increase of 4.0% over the same period last year. Overall, the company's wind power generation capacity and wind power utilization hour performance in the second quarter of 2020 were in line with our expectations. As domestic economic recovery accelerates, electricity demand in South China and the southeast coastal regions is showing a rapid month-on-month upward trend. We now expect the growth rate of wind power generation from Datang New Energy in 2020 to be about 5.9%, and the corresponding number of hours of wind power utilization may reach around 2,070 hours.

We maintained the investment rating “collected” by Datang New Energy and raised the target price to HK$1.33. Given that there were no surprises in power generation performance in the second quarter, we think the company's revenue side is expected to record a moderate year-on-year increase in the first half of 2020. The increase in depreciation and amortization, maintenance costs, and staff costs may match the growth rate of installed equipment, while financial expenses are expected to remain at a reasonable level.

Based on the company's power generation performance in the first half of 2020, we expect the mid-term results to be roughly the same year over year. Recently, due to speculation that the market might make a privatization offer to its parent company, the company's stock price has recorded a marked increase. Although the company has not proposed any decisions on mergers and acquisitions, we believe that positive market expectations in the short term will still support the company's valuation. Therefore, we maintained the “collection” rating for Datang Renewable Energy and raised the target price from HK$0.85 to HK$1.33. The current target price is equivalent to 9.9 times/8.1 times/6.0 times the price-earnings ratio of 2020/2021/2022.