CGN New Energy, the only non-nuclear clean energy power generation listing platform under CGN. The company listed on the main board of the Hong Kong Stock Exchange in 2014 and changed its name to CGN New Energy in 2015, highlighting the company's positioning. The company is an independent power generator with a wide range of power sources and geographical distribution, with a portfolio of wind, solar, hydropower, coal, cogeneration and gas projects in China, and gas and fuel projects in Korea. By the end of last year, the company's equity installed capacity reached 7550.6MW, of which 53.6 per cent of wind power and solar power were installed. It is expected that the company's new installed capacity this year will exceed that of 1GW, all of which will be installed by wind and solar power. The company expects to adjust its asset portfolio, targeting pure new energy power generation companies, and is expected to gradually divest South Korean assets, China coal-fired projects and inject new energy power generation projects under CGN. The company maintains a steady dividend ratio of 25%.
Summary of the report
The installation of new energy rights and interests continues to grow rapidly, promoting a rapid increase in profits. The installed scale of the company's new energy rights and interests has increased rapidly in the past few years. The installed capacity of the company's new energy rights and interests was 4962MW at the end of 2017 and 7551MW and 15% by the end of 2020. The new rights and interests are mainly installed in wind power and solar power projects. The proportion of company wind power increased significantly from 28.4% in 2017 to 53.6% in 2020. In 2019-20, the company's new Fengtai project rights and interests are installed in excess of 1GW. We conservatively estimate that the installed capacity of company wind power will increase by more than 1GW in 2021, and the proportion of company wind power will further increase to more than 60% by the end of this year. The proportion of installed capacity of the company's portfolio apoplexy projects has increased, while the utilization of coal-fired projects has decreased, and the proportion of new energy power generation with higher operating profit margins has increased. When the total electricity generation of the company increases little, the net profit increases rapidly. From 2017 to 2020, adjusted net profit increased from US $62 million to US $162 million, with CAGR reaching 37.7%, a rapid growth for four consecutive years. According to the company's recent announcement, the company's electricity generation in the first half of the year was 9233.5 gigawatt hours, an increase of 34.6 percent over the same period last year, equivalent to 67 percent for the whole of last year, including 70.2 percent for wind power projects, 24.5 percent for solar projects, and nearly 50 percent for wind power projects, a further increase from 42 percent last year. The substantial increase in power generation and the increased share of Fengtai project with higher operating profit margins are expected to promote the rapid growth of the company's performance.
Adjust the portfolio to increase the proportion of new energy installed. The proportion of scenic projects in the company's equity installed capacity increased steadily from 2017 to 2020, and the proportion of Fengtai projects reached 53.6% by the end of 2020. The company is promoting the divestiture of South Korean projects and Chinese coal-fired, gas and other project assets, the company's asset portfolio will gradually focus on new energy, we expect the company to gradually complete the disposal of these project assets this year and next year. After divesting South Korea and China's coal-fired, gas and other assets, Fengtai project has a higher operating profit margin, boosting the company's overall profitability. The company simultaneously promotes the acquisition of high-quality Fengtai projects owned by CGN, such as part of the stake in CGN Wind Power Company. If the acquisition can be completed, it will greatly enhance the installed scale of the company's rights and interests.
Zhongguang Nuclear Corporation's only non-nuclear clean energy power generation listing platform. As one of the four small giants of the central electric power enterprises, Zhongguang Nuclear Group has rich scenery resources. Under the overall planning of CGN, the business of CGN New Energy continues to obtain high-quality Fengtai project resources to ensure future growth. As the only non-nuclear clean energy power generation listing platform of CGN, the company has the expectation of injecting high-quality new energy projects into CGN. Up to the first quarter of this year, CGN holds the total scale of Fengtai project as 24.3GW. At the capital level, the financial company of CGN can provide financing to the company, and the financial cost is 10% lower than the benchmark, and the company can also enjoy more preferential loan financing when the financial leverage is high.
The company is expected to maintain a stable dividend ratio of 25%. CGN New Energy has maintained its dividend ratio at 25% over the years and continues to share the rich results brought about by the company's performance growth with shareholders. In early 2020, due to the strong uncertainty of the COVID-19 epidemic, the company suspended its dividend in 2019. After the haze of the COVID-19 epidemic in China subsided, the company maintained normal operation and sent out two consecutive years of dividends in 2019 and 2020 in 2021 to return to shareholders.
We expect the company to maintain a dividend ratio of 25% in the future and continue to share the fruits of the company's development with shareholders.
Investment advice: the company's 2020 net profit is $162 million, while 2020H1's net profit is $104 million. In 2021, the power generation of H1 company increased by 34.6% compared with the same period last year. According to Bloomberg's forecast, the company's net profit in 2021 will grow 30% from a year earlier, and its share price is now equivalent to PE9.1 times in 2021. We think there is room for valuation to rise and recommend investors to pay attention to it.
Risk tips: the divestiture speed of South Korean assets is slower than expected; the injection rate of new energy power generation projects of CGN is slower than expected; the recovery rate of subsidies is slower than expected; the financial cost is higher than expected; and the utilization hours of power plants are lower than expected.