Main points of investment
Hydropower generation in the third quarter of 2020, with a year-on-year increase of 45.71%:
The combined total electricity sales in the first nine months of 2020 was about 6456 million megawatts, down 0.59 percent from the same period last year. In the third quarter of 2020, total electricity sales were about 2458.04 million megawatts, an increase of 8.37 percent, of which thermal power decreased by 6.72 percent, hydropower increased by 45.71 percent, wind power increased by 15.55 percent, and photovoltaic increased by 36.53 percent. Based on the poor performance of hydropower in the first half of the year, it is expected that the annual hydropower generation in 2020 will be roughly the same as that in 2019.
The proportion of clean energy installed will continue to increase rapidly in the future:
As of June 30, 2020, the company's installed capacity of clean energy, including hydropower, wind power, photovoltaic power and natural gas power generation, totaled 8085.5 megawatts, accounting for 36.37% of the equity installed capacity. The company installed 66.7MW of wind power and 508.7 MW of photovoltaic in the first half of the year.
At present, the company's wind power and photovoltaic projects are close to 3GW, and the proportion of clean energy in the company is expected to increase rapidly in the future.
Subsidiary Wuling Electric Power buys back the shares of Yuanjiang Company, which has a positive impact:
On October 29, 2020, Wuling Electric Power, a subsidiary of the company, signed a confirmation letter of equity transfer on the exercise of the original shareholder's option to buy back the Yuanjiang rights and interests held by Huabao Trust (holding 34.32% interest in Yuanjiang Company) and Agricultural Bank of China Finance (holding 6.86% interest in Yuanjiang Company) at an exercise price of 3 billion yuan.
We believe that the financial performance of Yuanjiang Company will continue to be consolidated and will not affect the financial performance of the company.
After the recovery of the shares of Yuanjiang Company and the termination of its non-controlling shareholders' rights and interests, the company will no longer share potential economic returns with other entities, which will help to improve the company's operating cash flow and have a positive impact.
Give a buy rating and maintain the target price of HK $2.18:
In 2020, the company's PE is about 7.0x, PB is about 0.50x, and the dividend yield is as high as 9.7%. The company has low valuation and high dividend, highlighting the value of long-term investment. Taking into account the valuation of comparable companies in the industry, we maintain the target price of HK $2.18, which is equivalent to 7.0x and 5.0x PE in 2021 and 2022. the target price has 38% room to rise from the current price and maintain the buy rating.