HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Share price of <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a> has been under pressure over the last two weeks due to concern on future offshore wind power project return.</li>
<li>We believe the low tariff of Rmb0.19/kWh won by a Huaneng Power Group consortium in Fujian is more an exceptional case and should not be taken as a new normal.</li>
<li>China Longyuan's growth has been well secured by its project pipeline as well as 21GW potential injection from parent. This round of de-rating is just too excessive. </li>
</ul>


Share price of China Longyuan Power (916 HK) has been under pressure over the last two weeks due to concern on future offshore wind power project return.
We believe the low tariff of Rmb0.19/kWh won by a Huaneng Power Group consortium in Fujian is more an exceptional case and should not be taken as a new normal.
China Longyuan's growth has been well secured by its project pipeline as well as 21GW potential injection from parent. This round of de-rating is just too excessive. 


China Longyuan (916 HK): A De-Rating Too Excessive

China Power International / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-power-international" target="_blank" data-smartkarma-citation="entities:15548:1" rel="noopener">China Power International (2380 HK)</a> will acquire 2.15GW clean energy capacity from its parent SPIC for a total of Rmb7.5bn. This will add 14.3% to its end-FY21 clean energy portfolio.</li>
<li>We think the assets are priced attractively at 12.5x PER for FY21, a discount to peers' average of 14x. The acquired capacity has an impressive 45.8% YoY earnings growth.</li>
<li>CPI targets to have 70% of end-FY23 capacity from clean energy, and this implies a 46.3% CAGR between FY21 and FY23, which is a very exciting momentum. </li>
</ul>



China Power International (2380 HK) will acquire 2.15GW clean energy capacity from its parent SPIC for a total of Rmb7.5bn. This will add 14.3% to its end-FY21 clean energy portfolio.
We think the assets are priced attractively at 12.5x PER for FY21, a discount to peers' average of 14x. The acquired capacity has an impressive 45.8% YoY earnings growth.
CPI targets to have 70% of end-FY23 capacity from clean energy, and this implies a 46.3% CAGR between FY21 and FY23, which is a very exciting momentum. 


China Power International (2380 HK): Another Step in Clean Energy Transition

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are 28 changes for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> at the upcoming rebalance that will be implemented at the close of trading on 9 June.</li>
<li>We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.</li>
<li>There's a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.</li>
</ul>


There are 28 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.
There's a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.


CSI300 Index Rebalance: Big Sector Shift with 28 Changes

China Energy Engineering / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-energy-engineering-group" target="_blank" data-smartkarma-citation="entities:21017:1" rel="noopener">China Energy Engineering (3996 HK)</a> and <a href="https://www.smartkarma.com/entities/power-construction-corporation-of-china-limited" target="_blank" data-smartkarma-citation="entities:24220:1" rel="noopener">Power Construction Corporation Of China (601669 CH)</a> are the two giants in power construction industry in China; but there are significant differences between them.</li>
<li>Power China has better business and generation mix while Energy China won in terms of margin and profitability, leverage and financial position, new order momentum and hydrogen energy expansion. </li>
<li>We like Energy China "H" for cheap valuation, secured earnings and deep discount to Energy China "A". For just the A-shares, we prefer Power China "A" to Energy China "A".</li>
</ul>



China Energy Engineering (3996 HK) and Power Construction Corporation Of China (601669 CH) are the two giants in power construction industry in China; but there are significant differences between them.
Power China has better business and generation mix while Energy China won in terms of margin and profitability, leverage and financial position, new order momentum and hydrogen energy expansion. 
We like Energy China "H" for cheap valuation, secured earnings and deep discount to Energy China "A". For just the A-shares, we prefer Power China "A" to Energy China "A".


Compare and Contrast: Energy China 中国能建 (3996 HK/601868 CH) And Power China 中国电建 (601669 CH)

China Three Gorges Renewables / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-three-gorges-renewables" target="_blank" data-smartkarma-citation="entities:28950:1" rel="noopener">China Three Gorges Renewables (600905 CH)</a> (CTGR) has an splendid FY21 as it pre-announced result with a range of 46.5-53.1% growth in recurring profit, fuelled by generation and disposal gains. </li>
<li>The first full-year contribution of many projects commissioned in 4Q21, which boosted a 28.4% QoQ surge in power generation, should underpin FY22 earnings - consensus forecast is expecting 41% growth.</li>
<li>YTD, CTGR's share price performed in line with Shanghai Composite Index (-6.1%), but its strong EPS CAGR of 22% for FY21-23 provides room for it to outperformed in medium term. </li>
</ul>



China Three Gorges Renewables (600905 CH) (CTGR) has an splendid FY21 as it pre-announced result with a range of 46.5-53.1% growth in recurring profit, fuelled by generation and disposal gains. 
The first full-year contribution of many projects commissioned in 4Q21, which boosted a 28.4% QoQ surge in power generation, should underpin FY22 earnings - consensus forecast is expecting 41% growth.
YTD, CTGR's share price performed in line with Shanghai Composite Index (-6.1%), but its strong EPS CAGR of 22% for FY21-23 provides room for it to outperformed in medium term. 


China Three Gorges Renewables (600905 CH): Good, and Better Is Coming

China

China Longyuan Power Group Corporation Limited designs, develops, and operates wind farms. The Company also provides thermal power, solar power, tidal power, biomass power, and geothermal power services. China Longyuan Power Group conducts wind farm repair, maintenance, and training businesses.

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China Longyuan (001289 CH)

China Longyuan (916 HK): A De-Rating Too Excessive

The plunge in valuation has more than reflected the concerns on weaker return outlook for offshore wind power projects, but China Longyuan's long...

Osbert Tang, CFA

China Power International (2380 HK): Another Step in Clean Energy Transition

Acquisition of 2.15GW of clean energy capacity from its parent will push ahead CPI's target of having 70% of capacity from clean energy at end...

Osbert Tang, CFA

CSI300 Index Rebalance: Big Sector Shift with 28 Changes

The June rebalance of the CSI300 Index will have 28 changes, a large sector skew, one-way turnover of 4.11% and a one-way trade of CNY 10bn. The...

Brian Freitas

Compare and Contrast: Energy China 中国能建 (3996 HK/601868 CH) And Power China 中国电建 (601669 CH)

We like Energy China "H" for cheap valuation, secured earnings and deep discount to "A". For just the A-shares, we prefer Power China "A" to Energy...

Osbert Tang, CFA

China Three Gorges Renewables (600905 CH): Good, and Better Is Coming

CTGR's pre-announced FY21 result beats market expectations, and FY22 beyond will be fuelled by more new capacity completion, particularly from...

Osbert Tang, CFA

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