Incident: Recently, CGN Power announced its operating results for the first half of the year. The company achieved a power generation capacity of 113.4 billion kilowatt-hours, an increase of 0.08% over the previous year. The number and time of overhauls in the first half of the year increased compared to the same period, and the power generation remained basically the same, which was basically in line with expectations. Meanwhile, in the context of the new unit being connected to the grid and the flexible release of the Taishan unit, the performance is expected to be released in the second half of the year. We expect the company's profit to maintain steady growth and raise the target price to HK$3.80, corresponding to the 2024 profit valuation by 15.8 times, and the “buy” rating.
Report summary
The first half of the year achieved a power generation capacity of 113.4 billion kilowatt-hours, the same as the same period last year. In the first half of 2024, the company achieved a power generation capacity of 113.4 billion kilowatt-hours, an increase of 0.08% over the previous year; among them, electricity from subsidiary companies was 87.8 billion kilowatt-hours, a slight decrease of 0.21% year over year, and 25.5 billion kilowatt-hours from affiliated companies, an increase of 1.06% year on year. Feed-in electricity volume was 106 billion kilowatt-hours, up 0.09% year on year; among them, electricity from subsidiary companies was 82 billion kilowatt-hours, a slight decrease of 0.19% year over year, and electricity from associated companies was 24 billion kilowatt-hours, up 1.03% year over year. Due to the increase in the number and time of overhauls in the first half of the year compared to last year, the company's power generation capacity in the first half of the year was basically the same as last year when new units were added. With several major repairs completed, power generation is expected to increase in the second half of the year.
The Taishan unit was released flexibly. On May 25, the Fangchenggang Unit 4 was eligible for commercial operation, the company announced that Fangchenggang Unit 4 had commercial operation conditions. After the anti-4 grid connection, the company's total installed capacity increased to 31.75 gigawatts, and the power generation capacity was increased. Meanwhile, the Taishan nuclear power plant overhaul was completed in December last year.
Last year, power generation capacity was under pressure due to lengthy overhauls of the unit; power generation at the Taishan Nuclear Power Plant increased sharply by 36% after being reconnected to the grid. In the context of the connection of new units connected to the grid this year and the flexible release of Taishan units, the results are expected to be released in the second half of the year.
Ten major repairs were completed in the first half of the year until June 30. The company completed a total of 10 overhauls, including 5 annual material replacement overhauls, 4 ten-year overhauls, and 1 initial overhaul. In the third quarter, the company plans to carry out 4 new annual material replacement overhauls and 1 10-year overhaul.
The target price was raised to HK$3.80 to give a “buy” rating. We forecast that the company's revenue for 2024-2026 would be $88.3 billion/ $92 billion/ $97.8 billion, with growth rates of 7.0%/4.2%/6.3%; net profit to mother would be 12 billion yuan/13.4 billion yuan/14.9 billion yuan, respectively, with growth rates of 12.5%/11.2%/11.1%.
The company's power generation capacity is expected to increase steadily year over year. The company's overall performance is expected to rise steadily this year, raising the target price by HK$3.80, corresponding 15.8 times the 2024 profit valuation, and maintaining the “buy” rating.
Risk warning: Unit power generation fell short of expectations; unit overhaul time exceeded expectations; electricity price fluctuations exceeded expectations; nuclear power plant construction progress fell short of expectations; nuclear fuel prices exceeded expectations; nuclear power industry policies were tightened.