China Longyuan Power Group (0916.HK)_ 2025-26E Profit Cuts on Drop in Tariff and Less New Capacity

Summary of China Longyuan Power Group (0916.HK) Conference Call Company Overview - Company: China Longyuan Power Group - Ticker: 0916.HK - Market Cap: HK$20,339 million (US$2,615 million) - Current Price: HK$6.13 - Target Price: HK$7.20 (revised down from HK$8.00) [6][16] Key Industry Insights - Sector: Renewable Energy, specifically Wind and Solar Power - Market Dynamics: Increased competition leading to tariff cuts and delays in new capacity development [1][11] Core Financial Insights - Profit Forecasts: - Net profits for 2025E cut by 4.1% to Rmb6,781 million - Net profits for 2026E cut by 9.2% to Rmb7,146 million [1][15] - Revenue Projections: - 2024E Revenue: Rmb34,322 million - 2025E Revenue: Rmb32,274 million (down 5.7% from previous estimates) - 2026E Revenue: Rmb35,537 million (down 7.8% from previous estimates) [15][23] Tariff Changes - Tariff Reductions: - Average on-grid wind tariff expected to decrease by 7.0% in 2024E, 8.9% in 2025E, and 4.8% in 2026E [2][11] - Solar tariffs projected to drop by 10% in 2024E [2][11] - Impact of Tariff Cuts: Each 1% reduction in tariffs could lead to a Rmb173 million (2.6%) decrease in 2025E net profit [2][11] Capacity Development - New Capacity Projections: - New capacity from greenfield development reduced to 6.5GW in 2024E, 7.0GW in 2025E, and 7.0GW in 2026E [3][12] - Target of 7.5GW for 2024E likely to be missed due to delays in large-scale renewable projects [3][12] - Long-term Capacity Goals: Aim to reach 46-50GW by end of 2025E, up from 23GW in 2020 [3][12] Impairment Losses - Impairment Losses: Expected to decrease significantly to Rmb500 million in 2024E from Rmb2.1 billion in 2023 [4][13] - Debt Costs: Unit debt cost was low at 2.7% in 9M24, with potential for further reduction [4][13] Valuation Metrics - Valuation Ratios: - 2025E P/E: 7.1x - 2025E P/B: 0.6x - Expected dividend yield: 4.2% [5][6] Consensus vs. Citi Estimates - Comparison with Consensus: - 2024E net profit consensus: Rmb6,731 million (Citi: Rmb6,381 million, -5.2% difference) - 2025E net profit consensus: Rmb7,641 million (Citi: Rmb6,781 million, -11.2% difference) - 2026E net profit consensus: Rmb8,617 million (Citi: Rmb7,146 million, -17.1% difference) [17] Conclusion - Investment Recommendation: Maintain Buy rating due to attractive valuation despite downward revisions in profit forecasts and capacity growth [1][16]