China Yangtze Power Co.Ltd(600900) (600900)
1、 Event overview
On December 10, the company issued the plan for issuing shares, issuing convertible corporate bonds, paying cash to purchase assets and raising supporting funds and related party transactions.
2、 Analysis and judgment
The asset injection of Ukraine and Belarus was started in advance, and the global leader rose to a higher level
Before opening on November 29, the company issued the suspension notice on planning major asset restructuring, announcing that the controlling shareholder Three Gorges group is planning to inject the assets of Wudongde and Baihetan power stations into the company. Considering that 10 units of Baihetan Hydropower Station are still under construction and are planned to be put into operation before July 2022, the start-up time is about one year earlier than expected. After completing the injection of Ukraine and Belarus, the company’s installed hydropower capacity in China will increase by 57.6% from 45.5 million kW to 71.7 million KW. After the “four reservoir joint commissioning” is upgraded to “six reservoir joint commissioning”, the average annual power generation is expected to increase from about 200 billion kwh to more than 300 billion kwh.
The asset valuation of Ukraine and Belarus is estimated to be nearly 200 billion
The announcement shows that the net assets of Yunchuan hydropower in 2019, 2020 and 3q21 are RMB 32, 41.3 and 53.2 billion respectively, the revenue is RMB 0, 3.3 and 9 billion, and the net profit is RMB 0, 1.3 and 3.9 billion. According to the project budget and capital ratio, we estimate that the net assets at the time of injection in 2022 will be about 65 billion yuan. With reference to the capital increase of Huanghe hydropower and the valuation level of A-share hydropower company, we will give 3 times Pb, with a corresponding valuation of about 19.5 billion yuan; According to our previous calculation, the net profit in the stable production period is about 6.5 billion yuan per year. With reference to the valuation of comparable companies and considering the scarcity of large hydropower assets, 30 times PE is given, and the corresponding valuation is about 1950 billion yuan.
From Jinsha River to the whole country, the prospect of wind and light is “infinite”
The company’s estimated annual disposable cash flow from 2018 to 2020 is about 16.6 billion yuan. Assuming that the average cost is 5000 yuan / kW, under the capital ratio of 20% and 50%, the corresponding annual development scale of new energy is 16.6 million KW and 6.64 million KW. Previously, the new energy development planned by the company was limited to the Jinsha River basin where the existing power station is located, but the business layout of the subsidiary Three Gorges power (Changdian new energy) has been expanded to Inner Mongolia, Guangdong and other places, and the development potential of wind and light in the future is no longer limited.
3、 Investment advice
It is estimated that the company’s EPS will be 1.13/1.30/1.33 yuan in 21, 22 and 23 years respectively, Corresponding to the closing price of PE on November 26 (the trading day before the suspension), PE was 17.3/15.1/14.7 times respectively. Without considering the asset injection of wubai and the expansion of new energy scale, considering only the performance repair expected to improve in 2022, PE was given 20 times in 2022 according to the historical valuation level of the company, corresponding to the target price of 26.00 yuan, maintaining the “recommended” rating.
4、 Risk tips:
1. Fluctuation of incoming water from the Yangtze River; 2. Single power supply structure; 3. Market consumption affects electricity price; 4. Fiscal and tax policy adjustments.
