According to the Zhito Finance APP, FIRST SHANGHAI released a research report maintaining a 'Buy' rating on CHINA POWER (02380), forecasting a net income of 5.1/6/7.1 billion yuan for the company from 2024 to 2026, representing a year-on-year growth of 92%/17%/18%, with a Target Price of 4.73 HKD. The company's profit growth in 2024 is highly certain, as the returns from self-invested projects increase under the current low-cost trend; hydropower profits benefit from the restoration of water flow.

First Shanghai's main points are as follows:

Significant increase in power sales in the first ten months:

According to the company announcement, the total consolidated power sales volume for the first ten months of 2024 was 108,220,668 MWh, an increase of 30.56% compared to the same period last year. Thanks to the commissioning of new installations, the company's controlled wind power sales volume grew by 57.05% year-on-year; photovoltaic sales volume rose by 79.55% year-on-year. Hydropower benefited from the restoration of water flow in the first half of this year, with sales volume increasing by 62.62% year-on-year. The overall sales growth rate of the company performs exceptionally well in the Industry, demonstrating that the company’s incremental projects are progressing steadily, thereby driving rapid development in power sales business.

Asset restructuring optimizes business structure:

The company intends to sell itshydropower assets (5.9 GW, about 60% shareholding) to Spic Yuanda Environmental-Protection, receiving newly issued shares in Spic Yuanda Environmental-Protection as consideration, with CHINA POWER expected to hold over 50% of Spic Yuanda's equity after the Trade. Upon completion of this transaction, Spic Yuanda Environmental-Protection will become the Group's platform for hydropower assets in A-shares. The Group plans to gradually integrate the remaining approximately 20 GW of hydropower assets into Spic Yuanda Environmental-Protection over the next three years. This Trade can be viewed as the company's hydropower assets returning to A shares, fully utilizing the current high valuation characteristics of hydropower assets in the A-share market. By holding controlling rights in Spic Yuanda Environmental-Protection, the company further consolidates its position as the integrated clean energy flagship listing platform of the national group. The company will retain its wind and photovoltaic assets and continue its overall plan for returning to A-shares.

The construction of wind and solar projects is accelerating:

In the first half of this year, the company added 3.3 GW of new clean Energy installed capacity, including 1.2 GW of wind power and 2.1 GW of photovoltaic power, driving rapid growth in wind and solar performance. In the first half of the year, the company's profit per kilowatt-hour from wind and solar decreased by 2.5 and 3.3 cents year-on-year, mainly due to an increase in the proportion of grid parity projects. As of June 2024, the company's total clean Energy consolidated installed capacity will account for 77.07%, with an estimated 7 GW of new installed capacity for the whole year. The company aims to reach a 90% share of clean Energy installed capacity by 2025. The accelerated development of new Energy projects will bring sustained and stable profit growth to the company.