Hydroelectricity becomes China's main profit contribution during the power period

2010 mid-term income and net profit increased by 40.7% and 84.8% respectively year-on-year

In mid-2010, the company's revenue and net profit were *** (RMB) 6.932 billion yuan and 273 million yuan, respectively, a year-on-year increase of 40.7% and 84.8%. It was mainly at the end of 2009 that the company acquired Wu Ling Power and hydropower generation growth. Earnings per share of 0.05 yuan.

Electricity sales increased 42.6% over the same period of last year

In the first half of 2010, the company’s cumulative power generation was 23,862,236 megawatt-hours, and its electricity sold was 22,567,763 megawatt-hours, which was an increase of 42.6% and 45.0% respectively from the same period of last year. The main reason is that the company's acquisition of Wuling Power at the end of 2009 has caused a significant increase in installed capacity and a rebound in electricity demand. The high coal prices in the first half of the year resulted in a year-on-year drop in thermal power profits.

Unit cost of coal increased by about 10% year-on-year

In 2010, the unit fuel cost was 235.15 yuan/MWh, an increase of approximately 21.47 yuan/MWh from the same period of last year, which was mainly due to the increase in coal prices in the first half of 2010. It is expected that the company’s unit fuel costs will continue to remain at the same level in the second half of the year.

New power plant will increase the installed capacity of 2,038 megawatts

The company’s existing equity installed capacity is approximately 11,752 MW, of which hydropower installed capacity is 2,472 MW. Current power plants under construction include hydropower projects - Baishi Power Plant, Tuokou Power Plant and Heifengfeng Power Plant, with a total installed equity of 1,126 MW; thermal power projects Fuxi Power Plant and Xintang Power Plant, with a total installed equity of 912 MW. It is expected that the ratio of hydropower and thermal power will reach 26.1% and 73.9% after the above projects are completed and put into operation.

Target price 1.96 HKD, investment rating buy

We use the DCF valuation method to value the company, giving the company a target price of HK$1.96 for the next 12 months, and adjusting the 2010-2012 EPS to be ***0.11, 0.13, and 0.17 yuan, equivalent to 15.7, 13.3 of the EPS for the same period. 10.1 times P/E, target price has a 17.37% upside from current price, and investment rating buys.