Datang Group's flagship new energy platform, an established domestic leading green electricity operator. The company is the core green power platform under the Datang Group. Currently, the group holds 65.61% of the company's shares and promises that Datang New Energy has priority options and purchasing rights for the new energy business within the Group. The company, formerly known as Datang Chifeng Saihanba Wind Power Co., Ltd., is one of the earliest domestic power companies engaged in new energy development. By the end of 2023, the company held 15.42 million kilowatts of installed capacity, including 12.98 million kilowatts of wind power and 2.44 million kilowatts of photovoltaics. The company currently ranks 7th among A+H listed companies in terms of installed energy capacity. Wind power assets are concentrated in the Sanbei region, accounting for more than 80%.
Occupying the old wind farm in Sanbei, the wind resources are extremely high, but the performance of the early units was flawed. Judging from historical development, the company initially focused on cultivating regions with excellent Sanbei wind resources, and resource endowments were prominent in the current scarcity of high-quality wind farms. However, in terms of fan efficiency, as an established wind power operator in China, the company's units were put into operation in 2007-2011, accounting for about 40% of the company's current wind power. The old units have the characteristics of lower wind energy utilization, higher maintenance costs, and higher fixed unit costs.
The State Council issued a large-scale equipment upgrade plan to replace larger or newer aircraft. In March 2024, the State Council issued a notice on the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which once again mentions improving standards for wind turbines, photovoltaic equipment and product upgrades and decommissioning. In May 2024, China's Datang Group held a large-scale equipment upgrading promotion meeting to arrange for the deployment of group companies to promote large-scale equipment renewal work. The company installed 4,028 million kilowatts of wind power in 2010 and before 2010. Since the power of a single unit was generally less than 1.5 MW, but now 4MW has become mainstream, the “big generation to small” transformation policy for old wind farm fans below 1.5 MW may free the company from the shackles of old existing units and completely renew its operating efficiency.
Profit forecast and valuation: We expect the company's net profit attributable to parent company owners in 2024-2026 to be $29.38 billion, $31.82, and $3.05 billion, respectively. Excluding interest on perpetual bonds of about 500 million yuan, the current stock price corresponding to 2024-2026 PE is 5.8, 5.3, and 4.7 times, respectively. We selected Hong Kong stock new energy operators Longyuan Electric Power, CGN New Energy, and Kyohe New Energy as comparable companies. The average PE of comparable companies in 2024-2026 was 6.5, 6.0, and 5.6 times, respectively. The company's valuation was lower than the average of comparable companies and had a high margin of safety. The company's 2023 cash dividend was 0.07 yuan per share (tax included), corresponding to a dividend rate of 4.0%. There is a real downturn in the green power sector at the moment, but the response is quite adequate. The company's current valuation is at a historically low level, and the stock price is in a deep value range. First coverage, giving a “buy” rating.
Risk warning: Risk of historical subsidy impairment, new installations falling short of expectations, and fluctuations in electricity prices entering the market for new energy sources.