Summary of China Longyuan Power Conference Call Company Overview - **Company**: China Longyuan Power (916 HK/001289 CH) - **Industry**: Electric Utilities Key Financial Results - **1Q25 Net Profit**: RMB 1,902 million, a decrease of 22% year-over-year (y-o-y) [1] - **Profit from Continuing Operations**: Down 16% quarter-over-quarter (q-o-q) [1] - **Revenue**: RMB 8,140 million, a decline of 19% y-o-y [19] - **Gross Profit**: RMB 3,468 million, down 14% y-o-y [19] - **Basic and Diluted EPS**: RMB 0.23, a decrease of 21% y-o-y [19] Core Points and Arguments - **Weak Results**: The weak performance was attributed to: - Seasonal weakness in wind resources and grid curtailments - Increased staff costs and depreciation & amortization (D&A) in line with a 20% increase in wind and solar capacity [1][2] - Milder than expected drop in power sales tariffs [1] - **Curtailment Pressure**: Cumulative wind/solar installations reached 1,481 GW in 1Q25, with power output from wind and solar increasing by 15% and 44% y-o-y, respectively. This has led to increased curtailment pressure, particularly in provinces with weak local demand [2] - **Earnings Estimates**: Earnings estimates for Longyuan were cut by 6-8% for 2025-27 based on the latest data, which was not surprising to the market [2][25] - **Target Prices**: The target prices were adjusted to HKD 8.30/RMB 21.30 from HKD 8.70/RMB 22.40, reflecting attractive value at 0.6x 2025e P/B for H-shares [2][25] Segment Performance - **Wind Power**: - Revenue decreased by 2% in 1Q25, with power generation volume up by 4% despite a 10% increase in installed capacity to 30.4 GW. Utilization fell by 9% to 585 hours, and grid curtailments increased to approximately 4% [8][20] - Market-based power sales tariffs dropped by 9% y-o-y [8] - **Solar Power**: - Revenue increased by 43% due to a 56% rise in power generation volume. Cumulative capacity rose by 66% to 10.7 GW by the end of 1Q25 [8][20] - **New Builds**: Longyuan added 36 MW of new renewable capacity in 1Q25 and plans to add 5 GW in 2025, focusing on improving operating efficiency rather than capacity expansion [8] Valuation and Risks - **Valuation Metrics**: - Current share price: HKD 6.10, with an upside of 36.1% to the target price [5] - Target price for A-shares: RMB 21.30, with an upside of 26.9% [5] - WACC: 6.4%, with a terminal growth rate of 1.5% [26] - **Risks**: - Potential risks include stronger-than-expected coal prices affecting coal power profits, lower-than-expected tariffs, and weaker utilization leading to reduced power generation and revenue [26] Other Important Information - **Market Data**: - Market cap: HKD 110,200 million (USD 14,207 million) [5] - Free float: 95% for H-shares, 9% for A-shares [5] - 3-month average daily trading volume: USD 24 million for H-shares, USD 18 million for A-shares [5] - **ESG Metrics**: - Employee costs as a percentage of revenues: 11.2% - Female board members: 12.5% [13] This summary encapsulates the key points from the conference call, highlighting the financial performance, segment results, valuation, and associated risks for China Longyuan Power.