Stronger growth as a pure renewable play
HNR announced in-line 1H17 results after market close on Aug 22 with recurringprofit up 15% yoy and management expecting further curtailment improvementin 2H17. Unlike wind operator peers with thermal exposure, it is immune fromcoal price hike headwinds and hence is able to fully translate stronger output toearnings growth. Trading at 6.2x 17E PE and 0.8x 17E PB, valuation appears veryattractive, even against our conservative forecast of 12% core earnings CAGR in2017-19E. With a likely capex cut, free cashflow may turn positive earlier thanexpected. Reiterate Buy.
Utilisation +1.4%, tariff -1.7% and lower gearing
Recurring profit (after stripping out RMB36m net impact from FX loss anddividend income) reached RMB2.1bn, up 15% yoy. Revenue reached RMB5.6bn,up 14% yoy and driven by 14% generation growth for wind and 29% for solar.Utilization for wind reached 1,109 hours for 1H17, up modestly by 1.4% yoy, amida weak wind speed condition in 1H17. Utilization for solar reached 824 hours,up 2.4% yoy. Average tariff declined by 1.7% to RMB0.572/kWh, similar to thetrend in 1Q17 and primarily impacted by a yoy higher tariff discount in Yunnan, aswell as discount from ~10% output under direct power supply. Finance costs was4.45% in 1H17 (vs 4.63% in 1H16). Net gearing was 201% by Jun 2017, downfrom 245% by Dec 2016 due to share placement in May.
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