This report is read as follows:
The group's wind power photovoltaic power station is expected to be injected, and it has the potential for large-scale expansion relying on the resources of Gansu Province. At present, the company's share price only reflects the low valuation of the hydropower business and does not reflect the high growth and clean energy platform value expected.
Main points of investment:
Give an overweight rating and a target price of 11 yuan. The development of the company's hydropower business is stable, and we expect EPS0.48, 0.62,0.70 yuan from 2013 to 2015, corresponding to the previous share price of PE15, 12, 10X. We believe that the company's current share price only reflects the lower limit of the valuation of the hydropower business at 15,022 times, which does not fully reflect the injection expectation of Fengguang Power Station and the high growth after that. For the first time, the overweight rating is given, and the target price of 11 yuan is given with reference to a higher relative valuation.
Asset injection is expected to make the company taller and grow. The Group promised to inject Fengguang Power Station assets one after another at the end of 2012. The operating profit of Fengguang Power Station has improved significantly in 2013, and continues to improve under the promotion of policy. We believe that the market does not pay enough attention to the possible qualitative changes brought about by injection: the company will transform from a pure hydropower company with slow expansion and stable performance into a clean power company with rapid expansion and high growth, which will greatly enhance the value of the company.
Gansu resource conditions and group strength enhance the construction potential of Fengguang power station. Western Gansu has a vast Gobi area, which is suitable for large-scale construction of wind farms and photovoltaic power stations. In the future, after the completion of UHV DC lines from Gansu to Hunan and Jiangxi, the problem of power transmission will be effectively solved. Gansu Power Investment Group is the largest power investment enterprise in the province. Besides thermal power and hydropower, Gansu Power Investment Group also owns about 600MW wind farm and 70MW photovoltaic power station. We believe that the Group has the strength and willingness to increase investment in clean energy such as scenery, and make full use of the platforms of listed companies to promote the development of power business.
Catalyst. The policy benefits of wind power and photovoltaic lead to the improvement of operating profits; the improvement of Gansu electric power delivery capacity; and the group's clear timetable for asset injection.
Risk factors. The uncertainty of hydropower business affected by climate; the reduction of wind power and photovoltaic grid electricity prices; the problem of grid-connected consumption can not be quickly alleviated in the short term; the timing of asset injection is uncertain.