HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<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 Group Corp (916 HK)</a> achieved a 13.2% YoY growth in power generation for Oct, with wind power generation up by 11.2%. We consider this as a healthy pace as we calculated that the CAGR in wind power is still growing at a CAGR of 12.6% vs. Oct 2019, while it is just 5.6% for coal-fired generation. An earlier-and-colder winter, increase in capacity and lower curtailment are factors driving the 4Q21 outlook, in our view.   In the 3Q21 post-result call, Longyuan indicated that all major operating indicators are performing well - utilisation hours increased, curtailment rate dropped and on-grid tariff improved. While margin has contracted marginally, this is mostly the result from the coal segment, as depreciation and repair and maintenance costs for wind power are just growing in line with capacity. We think these takeaways are positive.

China Longyuan Power Group Corp (916 HK) achieved a 13.2% YoY growth in power generation for Oct, with wind power generation up by 11.2%. We consider this as a healthy pace as we calculated that the CAGR in wind power is still growing at a CAGR of 12.6% vs. Oct 2019, while it is just 5.6% for coal-fired generation. An earlier-and-colder winter, increase in capacity and lower curtailment are factors driving the 4Q21 outlook, in our view.   In the 3Q21 post-result call, Longyuan indicated that all major operating indicators are performing well - utilisation hours increased, curtailment rate dropped and on-grid tariff improved. While margin has contracted marginally, this is mostly the result from the coal segment, as depreciation and repair and maintenance costs for wind power are just growing in line with capacity. We think these takeaways are positive.

China Longyuan (916 HK): Gathering Pace in 4Q21

China Power International / Equity Bottom-Up

<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> (CPI) thinks that power storage in China will stay on in the near term, as supply-side structural issues are further exacerbated by cyclical demand issues. That said, the reform in power tariff will be a major policy direction in the future and will lead to a more market driven power sector in China. In our view, new/renewable energy sub-segment is likely to better place in the industry and we still prefer <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 Group Corp (916 HK)</a>.However, we think CPI is more interesting than many power conglomerates. It has the highest proportion of clean/renewable installed capacity (47.1%) when compared with <a href="https://www.smartkarma.com/entities/china-resources-power-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:5385:1" rel="noopener">China Resources Power (836 HK)</a>, <a href="https://www.smartkarma.com/entities/datang-international-power-generation-company-h" target="_blank" data-smartkarma-citation="entities:3664:1" rel="noopener">Datang International (991 HK)</a>, <a href="https://www.smartkarma.com/entities/huaneng-power-intl-inc-h" target="_blank" data-smartkarma-citation="entities:28:1" rel="noopener">Huaneng Power Intl (902 HK)</a> and <a href="https://www.smartkarma.com/entities/huadian-power-intl-corp-h" target="_blank" data-smartkarma-citation="entities:2506:1" rel="noopener">Huadian Power Intl (1071 HK)</a>, and this has also protected its 1H21 profit. Its plan to speed up disposal of coal-fired power plants also adds justification to its valuations. Relative to new energy plays' average of 18x PER and 2.1x P/B FY21F, CPI's 11.9x and 0.9x are clearly not expensive.

China Power International (2380 HK) (CPI) thinks that power storage in China will stay on in the near term, as supply-side structural issues are further exacerbated by cyclical demand issues. That said, the reform in power tariff will be a major policy direction in the future and will lead to a more market driven power sector in China. In our view, new/renewable energy sub-segment is likely to better place in the industry and we still prefer China Longyuan Power Group Corp (916 HK).However, we think CPI is more interesting than many power conglomerates. It has the highest proportion of clean/renewable installed capacity (47.1%) when compared with China Resources Power (836 HK), Datang International (991 HK), Huaneng Power Intl (902 HK) and Huadian Power Intl (1071 HK), and this has also protected its 1H21 profit. Its plan to speed up disposal of coal-fired power plants also adds justification to its valuations. Relative to new energy plays' average of 18x PER and 2.1x P/B FY21F, CPI's 11.9x and 0.9x are clearly not expensive. 

China Power International (2380 HK): Industry and Company Updates, Looks Relatively Inexpensive

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In 2020, Southbound trading accounted for 22% of the equity market ADT. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Tencent Holdings Limited (700 HK), Meituan (3690 HK), Cnooc Limited (883 HK), China Resources Power Holdings Company Limited (836 HK), Hygeia Healthcare Holdings Co., Limited (6078 HK).

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In 2020, Southbound trading accounted for 22% of the equity market ADT. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Tencent Holdings Limited (700 HK), Meituan (3690 HK), Cnooc Limited (883 HK), China Resources Power Holdings Company Limited (836 HK), Hygeia Healthcare Holdings Co., Limited (6078 HK).

Hong Kong Connect Flows: What Did Chinese Buy Before National Day

We think there are three developments at <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 Group Corp (916 HK)</a> that driven its recent strength and will stay supportive to the share price. They are: 1.) positive debut of <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>, 2.) approval from SASAC on merger with <a href="https://www.smartkarma.com/entities/inner-mongolia-pingzhuang-eng-resources" target="_blank" data-smartkarma-citation="entities:4267:1" rel="noopener">Pingzhuang Energy (000780 CH)</a>, and 3.) solid May and 5M21 generation. In particular, the positive performance of the IPO of CTGR is the most important factor, in our view. With potential further upside at CTGR in the near term, we believe Longyuan's strength will likely to hold as well.SASAC's approval also marked an important step in Longyuan's proposed absorption and merger with Pingzhuang Energy, allowing it to access the liquidity in the domestic market. This adds to the continued solid wind and overall power generation in May, sustaining the encouraging trend of good underlying business momentum. With Longyuan currently trading on 13.5x FY21F PER, compared with CTGR's 19.5x, we believe its valuation is demanding at all.

We think there are three developments at China Longyuan Power Group Corp (916 HK) that driven its recent strength and will stay supportive to the share price. They are: 1.) positive debut of China Three Gorges Renewables (600905 CH), 2.) approval from SASAC on merger with Pingzhuang Energy (000780 CH), and 3.) solid May and 5M21 generation. In particular, the positive performance of the IPO of CTGR is the most important factor, in our view. With potential further upside at CTGR in the near term, we believe Longyuan's strength will likely to hold as well.SASAC's approval also marked an important step in Longyuan's proposed absorption and merger with Pingzhuang Energy, allowing it to access the liquidity in the domestic market. This adds to the continued solid wind and overall power generation in May, sustaining the encouraging trend of good underlying business momentum. With Longyuan currently trading on 13.5x FY21F PER, compared with CTGR's 19.5x, we believe its valuation is demanding at all. 

China Longyuan (916 HK): Three Recent Positive Developments

Equity Capital Markets

China Three Gorges Renewables / Equity Capital Markets

<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) will formally kick off its IPO today at Rmb2.65 per share. Relative to its peers, we see the stock's valuations appealing given its growth outlook, sizeable scale and large market capitalisation. The 36.7x subscription rate for institutional interest during the price consultation period also indicated good demand from professional investors.The online IPO roadshow on 28 May also painted a positive picture for CTGR. The company addressed the issues on removal of subsidies, cost advantages, market expansion, business segment outlook and ROE prospects, and generally the takeaways are not disappointing. Mainland China-listed peers are sitting on an average of 21x PER and 1.5x P/B for FY21F, and this makes CTGR's proposed multiple - 13.6x (weighted average) and 1.1x P/B not too demanding.

China Three Gorges Renewables (600905 CH) (CTGR) will formally kick off its IPO today at Rmb2.65 per share. Relative to its peers, we see the stock's valuations appealing given its growth outlook, sizeable scale and large market capitalisation. The 36.7x subscription rate for institutional interest during the price consultation period also indicated good demand from professional investors.The online IPO roadshow on 28 May also painted a positive picture for CTGR. The company addressed the issues on removal of subsidies, cost advantages, market expansion, business segment outlook and ROE prospects, and generally the takeaways are not disappointing. Mainland China-listed peers are sitting on an average of 21x PER and 1.5x P/B for FY21F, and this makes CTGR's proposed multiple - 13.6x (weighted average) and 1.1x P/B not too demanding.

China Three Gorges Renewables (600905 CH) A-Share IPO: Kick-Start of IPO and Post-Roadshow Updates

China

China Longyuan Power Group Corp Ltd designs, develops, manages, and operates wind farms.  The Company also sells the electricity generated by the wind farms.

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China Longyuan Power (916 HK)

China Longyuan (916 HK): Gathering Pace in 4Q21

Longyuan sustained a healthy generation growth in wind and overall generation for Oct. With the traditional peak season in 4Q21, an earlier-and...

Osbert Tang, CFA

China Power International (2380 HK): Industry and Company Updates, Looks Relatively Inexpensive

China Power Intl is interesting as a new/renewable energy play among the traditional large power conglomerates in China. It has a high 47.1%...

Osbert Tang, CFA

Hong Kong Connect Flows: What Did Chinese Buy Before National Day

We will highlight weekly Southbound Connect inflows into Tencent, Meituan, Cnooc, China Resources Power, Hygeia Healthcare.

Ke Yan, CFA, FRM

China Longyuan (916 HK): Three Recent Positive Developments

We see the positive debut of CTGR, approval of the Pingzhuang merger and good May/5M21 generation figures are the key drivers behind Longyuan's...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Longyuan (916 HK): Gathering Pace in 4Q21

Longyuan sustained a healthy generation growth in wind and overall generation for Oct. With the traditional peak season in 4Q21, an earlier-and...

Osbert Tang, CFA

China Power International (2380 HK): Industry and Company Updates, Looks Relatively Inexpensive

China Power Intl is interesting as a new/renewable energy play among the traditional large power conglomerates in China. It has a high 47.1%...

Osbert Tang, CFA

Hong Kong Connect Flows: What Did Chinese Buy Before National Day

We will highlight weekly Southbound Connect inflows into Tencent, Meituan, Cnooc, China Resources Power, Hygeia Healthcare.

Ke Yan, CFA, FRM

China Longyuan (916 HK): Three Recent Positive Developments

We see the positive debut of CTGR, approval of the Pingzhuang merger and good May/5M21 generation figures are the key drivers behind Longyuan's...

Osbert Tang, CFA

China Three Gorges Renewables (600905 CH) A-Share IPO: Kick-Start of IPO and Post-Roadshow Updates

CTGR's IPO looks appealing on both fundamental and relative valuation perspectives. Its online IPO roadshow also addressed may investor concerns...

Osbert Tang, CFA