Utilities Sector

• YTD, China Longyuan Power (916 HK) has seen its share price weak, but we believe focus should not be on the poor FY22 result and the moderate 1Q23 generation growth.
• Based on 5.5-6.5GW planned capacity expansion in FY23, this will mean a solid growth of 17.7-20.9% YoY. Coupled with efficiency improvement, we expect a sharp rebound in FY23 profit.
• With impairment on Ukraine mostly made and reversal of exchange and trading losses, there will be a big swing in bottom line. We welcome the improvement in cash flow too.

• UK reserve power – Pyebridge YE22E revenue £1.9-2.1m; 2xPOCs funded
• Debt to equity conversion ~ £0.7m – strengthening balance sheet 
• South Africa WTE – Sustineri -Gauteng CHP 2.5 MW net. signed

• Fundamentally strong company with track record of high profitability and efficient operations. 
• Installed power generation capacity will more than double to ~5,500 MW by FY24 and another 4-5x by FY30. 
• Potential for DPS to improve from a trailing 1.70 INR to INR 2.50 by FY24, implying an attractive dividend yield of 7.5%. 

• Every quarter, Indian companies report their “Shareholding Pattern” for all to see. They show holdings by category type, and holders over 1%. 
• The big news in Q1 in AdaniLand was the failed FPO, thwarted by the Hindenburg Research report, and the Adani Promoter sale of stakes in 4 companies to GQG Partners. 
• The details in the change of the shareholder structure are, however, interesting.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
• There are only few more days left in the reference period used for the constituent selection process for the June 2023 Rebalance.
• Currently, I see 6 ADDs/DELs for the BSE 100 index and 4 ADDs/DELs for the BSE 200 index.

• The Adani names are seeing new news and commentary. SEBI is probing offshore deals for rules violations, SEBI filed an interim report Sunday with the Court, Cements are refinancing US$4bn.
• GQG’s Jain was interviewed by Bloomberg TV in NY saying he sees his Adani basket being a “multi-bagger in five years.” 
• Assuming growth and margins equivalent to peer max rates, all profits reinvested, and 100% gain in stock price in 5yrs, NP CAGR=33%, 2028 EV/EBITDA average of four names is 29.4x. 

COG’s FY 2022 results were in line with our expectations. The credit profile remains satisfactory, supported by a decrease in borrowings. We view positively that long-term debt and time deposits were lower.

We agree with management that the operating environment is likely to be favourable in 2023. According to the company, volume growth was 15% y-o-y in January and February 2023. COG is keen to reduce financing costs and extend its maturity profile by refinancing a portion of bank borrowings with a syndicated loan. Management said that COG is currently in talks with banks over a syndicated loan.

Management confirmed that the company is not keen on increasing indebtedness for expansions or acquisitions.

• China Power International (2380 HK) will enjoy another year of strong earnings improvement in FY23, as coal-fired segment returns to profit and new energy capacity drives growth.
• Solar and wind capacity will increase 66.5% and 23.1%, respectively, raising new energy’s proportion to over 70%. Profitability for hydropower also looks to recover in this year.
• There is huge room for asset injection from SPIC given the parent’s new energy capacity of 139GW, with only 20GW in CPI. Its FY23 PER of 8.4x PER is attractive. 

• This week it was reported that the release of Azure Power’s audited financial statements for FY2022 has been delayed again as appointed auditors Ernst & Young Mauritius have expressed an unwillingness to sign them off.
• An external agency is said to be investigating the whistle-blower allegations and the auditors are said to be uncomfortable with signing off the statements.
• Separately, the company recently released unaudited financials for two restricted groups – Azure Power Energy Limited and its restricted group entities, and Azure Power Solar Energy Private Limited and its restricted group entities.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
• The BSE AllCap March 2023 Rebalance results were announced and this changes the main universe from which SENSEX, BSE 100, and BSE 200 members are selected.
• In this insight, we take a look at the recent updates to my expectations and the price and volume performance of the candidates.

• Post market close yesterday it was announced that GQG Partners (GQG AU) had invested INR 154.46bn (US$1.87bn) in four Adani Group companies via block deals.
• The blocks were at a discount of 4.3% for Adani Ports & Special Economic Zone (ADSEZ IN) to 12.2% for Adani Enterprises (ADE IN). 
• There will be an increase in the free float for some Adani Group companies as a result of the blocks and there are implications for the stocks in indexes.

• Greenko Energy Holdings (“Greenko”; “the company”) is one of the leading independent clean energy companies in India.
• As of September 2022, the company had total operational capacity of about 5.3 gigawatts (GW) – excluding a stake in hydropower operator Teesta Urja Limited – across a diversified portfolio of renewable energy assets.
• Wind energy contributes about 3.2GW of operational capacity, hydro contributes about 0.6GW and solar contributes about 1.5GW.