大唐新能源(1798.HK):估值继续提升需要盈利增长的突破 下调评级至中性

Datang New Energy (1798.HK): Continued increase in valuation requires breakthroughs in profit growth, downgrading the rating to neutral

交銀國際 ·  Jun 13

There is still a risk of a year-on-year decline in first-half results. Affected by the year-on-year decline in wind/light utilization hours, we believe there is still a risk that the company's profit will decline in the first half of 2024. In the past, the company added less installed capacity in the first half of the year. Coupled with electricity prices in the first quarter of this year and the estimated total power generation situation for the first four months, the year-on-year change in the company's wind power generation capacity in the first half of the year was better than -1.5% in order to achieve a year-on-year flat profit. The company's wind power generation fell 5.6% year on year in the first four months. If the decline in wind power generation in the first half of the year is similar, the profit for the first half of the year will drop about 10% year on year. We will make a judgment on this until the company releases operating data in July.

There is a need to accelerate the number of new installations each year to cope with the risk of declining utilization of existing projects. Currently, we expect the company to add 1.8/2.1 gigawatts of installed capacity in 2024/25, an increase of 11.7%/12.2% year-on-year. As new projects are affordable projects and the share of market-based electricity transactions increases, we expect wind power/photovoltaic electricity prices to drop by about 3% year-on-year in 2024/25. Currently, under policy guidance, there is room for reduction in the utilization rate of large-scale wind and light projects with good resources. We believe that the company's new installed capacity needs to be accelerated every year to ensure that the annual power generation capacity is maintained at a year-on-year increase of more than 5% when the utilization rate of existing projects declines.

The potential benefits are yet to be verified. Although we think there are risks in terms of interim reporting and power generation growth, the company's projected net debt/total share capital for 2024 is 144%, which is lower than the average of the industry we cover. There is still the following potential benefits in this area: 1) In terms of installed equipment, the company still has room to leverage acquisitions to speed up the installation process; 2) the company's current expected dividend ratio of 23% is lower than 30-50% of its peers. If free cash outflow remains at the level of 2023, the company still has room to increase the dividend ratio. As for the above plan, we think it is more likely to choose one of the two, and the results will be reported in the interim before further verification can be obtained.

The increase in valuation should depend on whether profit growth breaks through. We believe that the company's valuation has increased due to the recent strengthening of electricity reform expectations, but based on the above analysis, the company's short-term profit growth is still at risk. We believe that the company needs to make a breakthrough on the profit side to have more room for improvement on the valuation side. Considering that the changes brought about by the electricity reform will take time to reflect, we moved the valuation base year to 2025 and raised the target price to HK$2.21 (previous value was HK$2.00) using a valuation benchmark of 5.8 times the historical average price-earnings ratio. Due to limited room for improvement, the rating was downgraded from buy to neutral.

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