Huaneng Hydropower(600025) 海通国际·2024-12-20 00:37Investment Rating - The report maintains an "Outperform" rating for the company, with a target price of RMB 12.19, representing a potential upside of 35% [5][20]. Core Insights - The company is a leading hydropower and new energy developer in the Lancang River Basin, with a controlled installed capacity of 29.20 million kilowatts as of the first half of 2024. It has announced a joint project to enhance its system regulation capabilities [2][17]. - The company has shown resilience in its financial performance, with a slight revenue decline of 0.5% in 2023, but a projected revenue growth of 7.3% in 2024. The net profit is expected to grow steadily over the next few years [3][5]. - The company is well-positioned to benefit from the ongoing market reforms in the electricity sector, which are expected to enhance its pricing power and overall profitability [3][18]. Summary by Sections Company Overview - The company is a subsidiary of Huaneng Group, holding a 50.4% stake, and focuses on hydropower development in the Lancang River Basin. It operates a cascade of hydropower stations with strong regulation capabilities [2][17]. Financial Performance - For 2023, the company reported revenues of RMB 23.50 billion and a net profit of RMB 7.60 billion, with year-over-year growth rates of -0.5% and 6%, respectively. The on-grid electricity price was RMB 0.221 per kWh, reflecting a 4% increase year-over-year [3][18]. - The company expects to achieve net profits of RMB 8.52 billion, RMB 9.53 billion, and RMB 10.11 billion for 2024, 2025, and 2026, respectively, with corresponding EPS of RMB 0.47, RMB 0.53, and RMB 0.56 [5][20]. Growth Prospects - The company is expanding its hydropower capacity through various projects, including the acquisition of Huaneng Sichuan, which adds 2.65 million kilowatts of installed capacity. New projects are expected to contribute significantly to future revenues [4][19]. - The company is also set to benefit from the issuance of tradable green certificates for new hydropower projects, which could enhance its revenue streams [4][19]. Valuation - The report uses a PE valuation method, assigning a multiple of 23x for 2025, leading to a target price of RMB 12.19. A PB valuation method suggests a fair price of RMB 12.72, indicating strong growth potential [5][20].