The country's new power generation installed capacity reached 25.24 gigawatts in the first five months of 2020, a decrease of 13.5% over the previous year. Among them, thermal power, hydropower, nuclear power, wind power, and solar power contributed 12.41 gigawatts, 1.73 gigawatts, 0 gigawatts, 4.9 gigawatts, and 6.15 gigawatts, respectively, during the period. By the end of May 2020, the cumulative installed capacity of domestic power generation reached 1,925 gigawatts. Among them, fossil energy accounts for 62.1%, while clean renewable energy accounts for 37.9%.

Domestic market investment in the power sector is expected to accelerate across the board in the second half of 2020. Domestic investment in the power sector increased 24.6% year-on-year to RMB 239.8 billion in the first five months of 2020. Among them, investment in power projects surged 64.6% year on year to RMB 126.4 billion during the period, while investment in national power grids fell slightly by 2.0% year on year to RMB 113.4 billion during the period. To stimulate domestic economic growth, we expect domestic investment in the power sector to reach more than 900 billion yuan in 2020, an increase of 12.6% over the previous year. Looking at the breakdown, we expect domestic investment in power engineering to reach more than RMB 350 billion during the year (up 11.5% year on year), while investment in power grids will reach more than RMB 550 billion (up 13.3% year on year).

We maintained our “collected” investment rating for the company and raised the target price to HK$3.80. Aiming to improve the company's overall profitability and ensure the company's continued growth in the future, we anticipate that in-depth reforms and corporate transformation will be promoted. The new target price is equivalent to 18.1 times/13.0 times/10.0 times the price-earnings ratio of 2020 to 2022 or 0.4 times/0.4 times/0.3 times the net price-earnings ratio of 2020 to 2022.