Jingu finance news | Guoyuan International issued a research report on September 24th, stating that the China Securities Regulatory Commission released the "Opinions on Deepening the Market Reform of Mergers and Acquisitions of Listed Companies," which mainly includes six aspects, also known as the "six merger rules." This will further enhance the resource allocation function of mergers and acquisitions, leverage the role of the capital markets as the primary channel for corporate mergers and acquisitions, adapt to the needs and characteristics of new production forces, and support listed companies in injecting high-quality assets to enhance investment value. It is expected that the implementation of the "six merger rules" will accelerate central SOE (state-owned enterprise) power groups to carry out strategic restructuring and specialized integration, further focusing on core responsibilities and industries, optimizing the layout of state-owned capital. As the leading of the five major power generation groups, National Energy Investment Group is expected to actively respond to the merger and restructuring policy. According to previous commitments and plans, clean energy assets will be injected in batches into China Longyuan (00916), creating a flagship listed platform for new energy.
The bank points out that the market has been generally pessimistic about the future electricity price trends previously, especially this year with poor wind resources and increasing curtailment, the valuation of the green energy sector has been under continuous pressure, far below the 1x PB level. Against the backdrop of recent interest rate cuts at home and abroad, electricity operators, as interest-rate-sensitive sectors with heavy asset investments, are expected to benefit from the downward trend in interest rates, leading to an increase in project investment returns and a decrease in overall financial costs, helping stabilize and grow the performance of electricity operators. Currently, with the overall recovery of market liquidity, sentiment, and confidence, the valuation of the green energy sector has begun to significantly recover, especially for state-owned asset companies like China Longyuan with significant discount on its A+H shares, which are expected to be among the first to recover, with substantial upside potential.
The bank has updated the company's target price to HK$10, equivalent to 12.5 times and 10.4 times PE for 2024 and 2025, respectively. The target price has a 46% upside potential compared to the current price, maintaining a buy rating.
