Chuantou Energy (600674) 2019 Interim Report Comment: Performance Meets Expected Profit Marginal Improvement

Chuantou Energy (600674) 2019 Interim Report Comment: Performance Meets Expected Profit Marginal Improvement

Event: Chuantou Energy released its 2019 semi-annual report.

The company’s 2019H1 operating income3.

200 million, a decrease of 5 every year.

7%; net profit attributable to mother 11.

500 million, a year reduction of 0.

8%; EPS 0.

26 yuan.

Reduced power generation and impact on main businesses: The company’s 2019H1 power generation decreased by 21 due to factors such as the “one stop, one policy” policy for water supply and ecological flow.

9%, of which the increase in power generation in the second quarter of 2019 decreased by 40.

1%.

Despite the increase in electricity prices, the company’s 2019H1 operating income3.

2 ‰ (5 per year reduction.

7%), gross margin of 52.

2% (reduction of 1 per year).

9 single); of which the company’s 2019Q2 operating income is 0.

98 ‰ (reduction of 18 per year.

8%), gross margin of 19.

8% (13 per year reduction)

2 averages).

Marginal profit improvement in the second quarter: The company’s main source of profit is investment income from Yalongjiang Hydropower (48% equity participation), and 2019H1 Yalongjiang Hydropower net profit replacement.

7%.

Affected by this, the company’s 2019H1 investment net income11.

9 ‰, an average of two in ten years.

5%; but net investment income for the second quarter of 20194.

90,000 yuan, an increase of 21 in ten years.

0%.

The company’s net profit attributable to the parent in Q2 20194.

1 ppm, an increase of 24 in ten years.

4% (net profit attributable to mothers in the first quarter of 2019 replaces ten years).

9%), margins improved in the second quarter.

Newly-controlled hydropower assets were added, and the long-term installed capacity was extended to the first half of 2019. The company’s acquisition of 60% equity of Panzhihua China Resources Hydropower Development Co., Ltd. has been completed.

The project is located on the main stream of the middle and lower reaches of the Jinsha River. The total construction period of the project is 72 months. The company’s long-term installed installed capacity is expected to expand.

The application for convertible bonds was approved, and the middle reaches of the Yalong River deserves attention: the company intends to publicly issue convertible bonds to raise no more than 4 billion funds, and it is planned to specifically use it to increase the capital of Yalong River Hydropower.

On July 26, 2019, the company’s application for the public issuance of convertible bonds was reviewed and approved by the issuance committee of the CSRC.

The current projects under construction on the middle reaches of the Yalong River include Lianghekou Hydropower Station (3 million 都市夜网 kilowatts) and Yangfanggou Hydropower Station (1.5 million kilowatts). The first unit is expected to be commissioned in 2021.

With the successive efforts of the Yalong River Midstream Hydropower Station, the company’s long-term growth deserves attention.

Earnings forecast and investment rating: According to the company’s operating data and other conditions, the company’s net profit attributable to its mother for 2019-2021 was slightly increased to 34.

0, 35.7, 36.

1 ppm (33 before adjustment.

8, 35.

5, 35.

900 million).

The company’s EPS for 2019-2021 is expected to be 0.

77, 0.

81, 0.

82 yuan, the current expected PE is 13, 12, and 12 times, respectively, maintaining the “overweight” level.

Risk reminder: the incoming water is higher than expected, the power demand is lower than expected, the unit’s commissioning progress is slower than expected, the on-grid electricity price is reduced, and the risk of rising financing costs is raised.