中國(guó)獨(dú)立電力生產(chǎn)商：長(zhǎng)期資本回報(bào)率可能低于預(yù)期

1、GlobalResearch18 March 2019EquitiesChinese Independent Power ProducersEquitiesElectric UtilitiesChinaLong-term ROE could be lower than expectedElectric UtilitiesChinaTurning negative on the Chinese IPPsWe lower our earnings and price targets for Chinese independent power producers (IPPs).Althoughcoa

2、lpricesarelikelytoweakenintheneartermgivenChinasslowing economy, we think this is already reflected in the share prices. The stocks have recovered an average 20% from the trough in October 2018 to around 0.7x 12-month forward P/BV. We think this implies investors could be factoring in long-term ROE

3、of 8%, higher than our estimates of 7% for the IPPs we cover, or 6% for predominantly coal-firedIPPs.Webelievepotentialcoalpricedownsideislimitedandthebenefitcould be offset by potential tariff cuts. We downgrade China Resources Power to Neutral, and Huaneng Power International, Datang International

4、 Power, and China Power International Development from Neutral to Sell.Coal price decline unlikely to be sustainedOur commodities analyst, James Kan, expects the coal price to correct in 2019 and remain at a similar level for the next few years, while the market appears to be expectingasustaineddown

5、wardtrend.Jamesforecastsaresupportedby:1)modest coalindustrycapexin2018;2)incentivisedlocalgovernmentskeepingcoalpriceshigh;3)slowing,butnotcollapsing,demand;and4)property,downstreamindustrialgoods andupstreammaterialsinventoriesarenothighenoughtoreducepowerdemand.Potential tariff cut risksWethinkco

6、alpower HYPERLINK /shared/d2y2NxeOFk on-gridtariffscouldcomeunderpressure,as:1)aweakeconomic outlook may put pressure on IPP tariffs, as the government plans to cut retail and industrial tariffs by 10% in 2019; and 2) the government may cut IPP tariffs to supplement the renewable energy subsidies fu

7、nd. The government recently also cut VAT from 16% to 13%, which might ease some pressure onIPPs.Revising our earnings forecasts and price targetsWeraiseourearningsestimatesbyanaverage35%for2019andlowerthem14%for 2020, due to changes in UBSs coal price forecasts. We lower our long-termearnings estima

8、tes as we expect the coal price to remain at the 2020E level, leading to our9% lower price targets on average.Figure 1: Valuation summaryKen HYPERLINK mailto:ken.liu +852-29717516Alex HYPERLINK mailto:alex-c.liu +86-213-8668857Simon Powell HYPERLINK mailto:simon.powell +852-29717772Abigail Associate

9、Analyst HYPERLINK mailto:abigail.sun +86-213-8668637 RatingShare Pricetarget 2018EEPS 2019EEPS 2020EEPSCompanyNewOldpriceNewOldChgUpsideNewOldChgNewOldChgNewOldChgHuanengSellNeutralHK$4.67HK$4.50HK$5.20-13%-4%0.170.1514%0.360.2736%0.270.49-44%CR PowerNeutralBuyHK$14.60HK$16.00HK$18.40-13%10%1.261.34

10、-6%2.121.6727%2.272.29-1%DatangSellNeutralHK$2.11HK$1.90HK$2.00-5%-10%0.140.144%0.190.1618%0.190.22-12%CPISellNeutralHK$1.89HK$1.80HK$1.90-5%-5%0.130.123%0.270.2128%0.260.29-11%ReutersPE (x)P/BV (x)ROEDividend yieldCompanycode2018E2019E2018E2019E2018E2019E2018E2019EHuaneng0902.HK11.1x14.7x0.7x0.7x6.

11、0%4.5%6.3%5.9%CR Power0836.HK6.8x6.4x0.8x0.8x12.5%12.4%6.0%6.0%Datang0991.HK9.7x9.6x0.6x0.6x6.0%5.9%5.2%5.2%CPI2380.HK6.0 x6.3x0.5x0.5x8.4%7.7%6.6%6.3%Above data as at 15 March 2019. Source: Company data, Reuters, UBS estimates HYPERLINK /investmentresearch /investmentresearchThisreporthasbeenprepar

12、edbyUBSSecuritiesAsiaLimited. ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURESBEGIN ONPAGE36. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors shou

13、ld consider this report as only a single factor in making their investment decision.Chinese Independent Power ProducersUBS Research THESIS MAP a guide to our thinking and whats where in this reportMOSTFAVOREDLEAST FAVOREDChinaResourcesPowerDatangPIVOTALQUESTIONSQ:Willcoaloversupplyre-emergein2019,ca

14、usingasignificantpricecorrection?No.Webelievecoalcompaniesrealisedcoalpricesin2019willcorrectonlyRmb30/t(5%YoY)and hover at the same level for the next few years. We think the market is overly concerned about potential coal oversupply in China and a downward trend in coalprices. HYPERLINK /shared/d2

15、I4cfQD8Nj7X Ca cal ectr l ery e ssaed cal re ecs? .Q: Are IPP tariffs at risk of falling further?Possibly.Webelievetheon-gridtariffcouldbeadjusted,as:1)theweakeconomicoutlookmayput pressureonIPPtariffstofulfilthegovernmentsgoalofreducinginputcostsforindustrialusers;and2)thegovernmentcouldpotentially

16、cutIPPtariffstosupplementtherenewablesubsidiesfund.But webelievetherisksaremanageableasVATcouldbereducedtooffsettariffcuts. HYPERLINK /shared/d2OGSv2HVtW6 Ers ecvey d e ser tan eete. .10 Q: Will the power sector become the next supply-side reform candidate?Likely. With sharply falling profitability,

17、 rising debt and fading demand growth, we believe the Chinese power sector would follow the similar supply-side reform path as other sectors. We estimate 13-16% of Chinas coal-fired power capacity could be shut down. HYPERLINK /shared/d2IIQ1KTyE7u9 Near-term challenge priced in; ROE recovering 2018.

18、03.285UBSVIEWWelowerourearningsestimatesandpricetargetsforChinaIPPs.Althoughcoalpricesarelikelyto weaken in the near term given Chinas economic slowdown, we think there is limited room for the coal price to fall further and benefits would be offset by potential tariff cuts. We expect sectorROE to re

19、main at around 7% over the long term.EVIDENCEThegovernmentaimstoreducecommercialandindustrialend-userstariffsbyanother10%in2019, suggestingpotentialpressureonIPPs.Coalcapexwasnothighin2018,andlocalgovernmentshave incentive to keep coal prices high, suggesting limited coal pricedownside.WHATSPRICEDIN

20、?Share prices have recovered 20% to 0.7x 12-month forward P/BV on average from the October 2018 trough. We think this implies investors are expecting long-term ROE of 8%, higher than our 7%averageestimatefortheIPPsweourcover,or6%forpredominantlycoal-firedIPPs. HYPERLINK l _bookmark2 more We expect R

21、OE to remain at 7% over the long term20%15%10%5%0%2003200420052006200720082009201020112012201320142015201620172018E2019E2020E2021E2022E-5%2003200420052006200720082009201020112012201320142015201620172018E2019E2020E2021E2022ESource: China Electricity Council, UBS estimatesChanges to our EPS estimates

22、and price targetsWereviseourEPSforecasts4%/35%/-14%for2018/2019/2020,mainlytoreflect changesintheUBScommoditiesanalystscoalpriceforecasts.OurcommoditiesanalystJamesKanexpectstheQHD5,500kcalcoalpricetofall from Rmb649/t in 2018 to Rmb570/t in 2019, and hover at around Rmb580/t for the next few years.

23、 This is because: 1) coal capex is not significant; 2) local governments have incentive to keep coal prices high; 3) demand might slow but not collapse; and 4) inventories are not high.Basedontheseassumptions,weraiseour2019earningsforecastsfortheIPPswe cover but lower them for 2020 onwards. If the c

24、oal price remains at around Rmb580/t, we estimate the average ROE of major IPPs could stay at around 7% over the long term and would not recover to 10%. This suggests downside to our previousestimates.Figure 2: QHD coal prices change vs IPP share prices14090014090080012070010060080500400603004020010

25、0- Chinese IPPs share price - LHS (re-based to 100) Qinhuangdao5,500kcal/kg-RHS(Rmb/t,incl.VAT)Source: Reuters, WindHuaneng has the highest earnings sensitivity HYPERLINK l _bookmark1 Figure3showstheearningssensitivityofChineseIPPs.Huanengismostsensitive to coal prices, tariffs and utilisation rate

26、changes, because it has the highest percentage of coal power capacity amongpeers.Figure 3: Earnings sensitivity of Chinese IPPsHuanengCR PowerDatangCPI2019E2020E2019E2020E2019E2020E2019E2020E+1% average coal prices-10.1%-11.8%-3.4%-3.4%-4.6%-4.0%-4.0%-3.8%+1ppt thermal utilisation rate10.9%14.1%4.0%

27、3.8%5.6%5.3%5.1%5.4%+25bp of interest rate-5.4%-6.6%-1.0%-1.0%-3.4%-3.0%-3.1%-3.4%+1% coal-fired tariff14.3%19.0%5.0%5.0%7.2%7.2%5.8%6.3%Source: Company data, UBS estimatesOur price targets now imply around 0.6x 12-month forward P/BV for the sector. Wethinkthisisjustified,asweforecastlong-termROEtor

28、emainatthe7%level, compared with a cost of equity of 10%.Figure 4: Changes to ratings, price targets and EPS estimatesReutersRatingPrice target2018E EPS2019E EPS2020E EPSCompanyCodeNewNewOldChangeNewOldChangeNewOldChangeNewOldChangeHuaneng0902.HKSellHK$4.50HK$5.20-13%0.170.1514%0.360.2736%0.270.49-4

29、4%CR Power0836.HKNeutralHK$16.00HK$18.40-13%1.261.34-6%2.121.6727%2.272.29-1%Datang0991.HKSellHK$1.90HK$2.00-5%0.140.144%0.190.1618%0.190.22-12%CPI2380.HKSellHK$1.80HK$1.90-5%0.130.123%0.270.2128%0.260.29-11%Note:EPSforCRPowerisinHK$whileothersareinRmb. Source:Companydata,Reuters,UBSestimatesChinese

30、 IndependentPowerProducersUBSResearchWHATSPRICEDIN? HYPERLINK l _bookmark0 return Share prices have recovered with the coal price moderatingChineseIPPssharepriceshaverecovered20%onaveragefromtheOctober2018 trough, driven by moderating coal prices and the overall market rally. The coal price fell to

31、Rmb580/t in February 2019, close to our long-term forecast, suggesting limited downside from here.We think the market has priced in a sustained coal price decline from 2019 onwards, but has not yet priced in tariff pressure from the governments target to reduce costs for industrial end-users. Howeve

32、r, we think the coal price would remain at the 2020 level and not drop further, as it did in the 2013-15 cycle. We expectIPPsaveragelong-termROEtoremainataround7%,belowthehistorical peak of 15% and our previous forecast of 10% HYPERLINK l _bookmark3 (Figure6).Figure 5: IPP share price performance vs

33、 MSCI China18016014012010080Feb-17 Mar-17 Apr-17May-17 Feb-17 Mar-17 Apr-17May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Aug-18 Sep-18 Oct-18 Dec-18 Jan-19 Feb-19Mar-19MSCIChinaCoal IPPsSource: ReutersFigure 6: Coal price changes (2008-20E)Rmb ton9008007006005004003002008 2009 2010

34、2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020ESource: Wind, UBS estimatesIPPs tend to be counter-cyclical, but will thiscontinue? HYPERLINK l _bookmark4 7is inAsinisto be is be in in However,webelievethechallengethistimecouldbeasmaller-than-expectedcoal price drop and a faster-than-expected tar

35、iff cut, which is unlikely to result in a significant turnaround in IPPsROE.Figure 7: IPPs share price performance vs MSCI China900Rising coal price environmentFallingRising coal price environmentFallingcoalpriceenvironmentrebased to100rebased to1007006005004003002001000Jan-04 Jan-05 Jan-06 Jan-07 J

36、an-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15MSCIChinaHuanengDatangCRPSource: ReutersAre dividends attractive?Chinese IPPs are increasingly being viewed as dividend yield stocks, with some investors beginning to focus on dividend yields as growth slows. However, we believethevisibilityonChi

37、neseIPPdividendsislowastheirdividendpoliciesare mostlyonapayoutratiopolicy,sothatanychangesinearnings(likelyduetocoal price volatility) will affect the actual dividend yield. We therefore think that unless dividend yields are compellingly attractive to compensate for yield volatility, investors may

38、not necessarily want to buy thesestocks. HYPERLINK l _bookmark5 Figure8showsthe12-monthforwarddividendyieldfortheChineseIPPs.TheIPPs are trading at around 6% dividend yield, close to their average past five-year trading range. We think yields are not yet compelling. Dividend yields of around 8%, sim

39、ilar to the level in 2016, would be an attractive point for investors to consider from a dividend yield perspective, in ourview.12108642Mar-09 Jun-09 Mar-09 Jun-09 Oct-09 Feb-10 May-10 Sep-10 Dec-10 Apr-11 Aug-11 Nov-11 Mar-12 Jul-12 Oct-12 Feb-13 May-13 Sep-13 Jan-14 Apr-14 Aug-14 Nov-14 Mar-15 Jul

40、-15 Oct-15 Feb-16 Jun-16 Sep-16 Jan-17 Apr-17 Aug-17 Dec-17 Mar-18 Jul-18 Oct-18 Feb-19CRPowerHuanengDatangChinaPowerSource: Reuters, UBS estimatesCheap valuation but not attractive given low ROE HYPERLINK l _bookmark6 Figure 9 and HYPERLINK l _bookmark7 Figure 10 show the enterprise value per kW fo

41、r CR Power and Huaneng Power, respectively. We do not show the EV/kW for China Power and Datang Power because we think it is difficult to gauge the value the market has given to China Powers hydropower business and Datang Powers non-power business, as their asset portfolios are more diversified.Figu

42、re 9: EV/kW forCRPowerFigure 10: EV/kW for HuanengPowerW W Replacementcosts(Rmb/kW)EV/kW(Rmb/kW)12,00011,00010,0009,0008,0007,0006,0005,0004,0003,000Rmb/kW EV/kW(Rmb/kW)7,000 Replacement costs(Rmb/kW)6,5006,0005,5005,0004,5004,0003,5003,000Jan-02 Nov-02 Sep-03 Jul-04 Jan-02 Nov-02 Sep-03 Jul-04 May-

43、05 Feb-06 Dec-06 Oct-07 Aug-08 May-09 Mar-10 Jan-11 Nov-11 Aug-12 Jun-13 Apr-14 Feb-15 Nov-15 Sep-16 Jul-17 May-18 Feb-19Note:TheEVforthewindbusinesseshavebeentakenout,assuminga replacement cost ofRmb8,000/kW.Source: Reuters, company data, UBS estimatesSource: Reuters, company data, UBS estimatesSep

44、arately, we also look at whats priced-in by evaluating the companies P/BV multiples versus their ROE. On P/BV versus ROE, the 0.7x 2019E P/BV is not attractiveinourview,asweforecastsectorROEtoremainatthe7%leveloverthe long term.ReutersCurrentPriceUpsidePEP/BVROEDividendyieldcodeRatingpricetargetpote

45、ntial2019E2020E2019E2020E2019E2020E2019E2020EHuaneng0902.HKSellHK$4.67HK$4.50-4%11.1x14.7x0.7x0.7x6.0%4.5%6.3%5.9%CR Power0836.HKNeutralHK$14.60HK$16.0010%6.8x6.4x0.8x0.8x12.5%12.4%6.0%6.0%Datang0991.HKSellHK$2.11HK$1.90-10%9.7x9.6x0.6x0.6x6.0%5.9%5.2%5.2%CPI2380.HKSellHK$1.89HK$1.80-5%6.0 x6.3x0.5x

46、0.5x8.4%7.7%6.6%6.3%Note: Above data as at 15 March 2019. Source: Company data, Reuters, UBS estimatesWe are on average above consensus earnings for 2019 but below consensus in 2020 (see HYPERLINK l _bookmark8 Figure 12). We think the differences are mainly caused by coal price forecasts.Whilethemar

47、ketmaybepricinginalineardeclineinthecoalprice,we expectasignificantdeclinein2019butagradualrecoveryin2020.Figure 12: Earnings forecasts UBS versus consensus(Rmb m)UBSConsensusDifference2018E2019E2020E2018E2019E2020E2018E2019E2020EHuaneng2,6505,4694,1412,8605,3727,258-7%2%-43%CR Power6,11310,28610,98

48、06,2228,17610,128-2%26%8%Datang2,4623,4623,4982,8643,8964,548-14%-23%CPI1,2342,6322,5171,2492,2942,989-1%15%-16%Source: Reuters, UBS estimatesGlobalResearch18 March 2019China Resources PowerWatch out for the dividend policyDowngrade to Neutral; dividend uncertaintyWe downgrade CR Power from Buy to N

49、eutral with a lower price target of HK$16.00. Webelievethereareincreasinguncertaintiesaboutitsdividendpolicyasthethree-year fixed DPS policy expired in 2018. Excluding any one-off cash receipt from assets disposal, we estimate the equity free cash flow in 2019 would be just sufficient to pay dividen

50、ds.Thisleaveslimitedcushionincashflowforanychangesincoalprices,tariffs and utilisation rates. However, one counter measure could be management cutting capexorsellingassetstomaintainthedividendpolicy.Asthecompanymayannounce its latest dividend policy on 22 March 2019, we will review our estimates whe

51、n we have more clarity.Coal price downside is limited after 2020Although coal prices are likely to weaken in the near term given Chinas slowing economy, we think potential downside is limited and benefits could be offset by potential tariff cuts. We estimate CR Powers ROE could remain at 11-12% over

52、 the long term. The share price has rallied 15% from the trough in October 2018. Wethink investorshavepricedinpotentialcoalpriceweaknessin2019,butnottariffcutrisks.Lower earnings estimates to reflect updated coal price forecastsWeraiseour2019earningsestimate27%duetofasterdeclinesinthecoalprice,and l

53、owerourlongtermearningsforecasts5-10%,asweexpectthecoalpricetoremainat the Rmb580/t level over the long term, suggesting 11-12% ROE for CR Power. This results in a 13% lower price target.Valuation: lower price target from HK$18.40 to HK$16.00We base our price target on DCF, assuming a WACC of 9.0%,

54、explicit cash flow to 2025E, a terminal growth rate of 1% and return on capital of 8.0%. Our price target implies0.9x2019EP/BV,whichwethinkisreasonablegiven11-12%long-termROE.ChinaChinaElectric UtilitiesElectric UtilitiesEquities12-monthratingNeutralEquitiesPrior:Buy12mpricetargetHK$16.00Prior: HK$1

55、8.40PriceHK$14.60RIC: 0836.HK BBG: 836 HKTrading data andkeymetrics 52-wk rangeMarketcap.HK$70.2bn/US$8.94bnShares o/s4,808m(ORD)Freefloat36%Avg. dailyvolume(000)10,007Avg. daily value(m)Common s/h equity (12/18E) HK$79.2bn P/BV(12/18E)Net debt /EBITDA(12/18E)3.8xEPS (UBS, diluted)(HK$) From To % ch

56、 Cons. 12/18E 1.34 1.26-6 12/19E1.672.12271.6812/20E2.292.27-12.03Ken HYPERLINK mailto:ken.liu +852-29717516SimonPowell HYPERLINK mailto:simon.powell +852-29717772Abigail Sun HYPERLINK mailto:abigail.sun +86-213-8668637Highlights (HK$m)12/1512/1612/1712/18E12/19E12/20E12/21E12/22ERevenues71,43666,21

57、373,31271,18073,58580,39085,13187,950EBIT (UBS)24,08517,29413,37712,61416,72717,68418,69019,302Net earnings (UBS)14,2508,8066,0136,11310,28610,98011,83212,568EPS (UBS, diluted) (HK$)2.971.831.251.262.122.272.442.60DPS (HK$)0.850.870.880.880.880.880.880.88Net (debt) / cash(87,141)(87,116)(95,541)(88,

58、489)(85,679)(78,097)(68,889)(57,229)Profitability/valuation12/1512/1612/1712/18E12/19E12/20E12/21E12/22EEBIT margin %33.722.722.022.021.9ROIC (EBIT) %15.410.410.911.612.1EV/EBITDA (core) x4.23.8P/E (UBS, diluted) x6.05.6Equity FCF (UBS) yield %14.05.812.819.523.1Net dividend yield %6.06.06.06.06.0So

59、urce: Company accounts, Thomson Reuters, UBS estimates. Metrics marked as (UBS) have had analyst adjustments applied. Valuations: based on an average share price that year, (E): based on a share price of HK$14.60 on 15 Mar 2019 22:37 HKTChina Resources PowerNeutral (Price targetHK$16.00)UBS Research

60、 THESIS MAP a guide to our thinking and whats where in this reportPIVOTALQUESTIONSQ:Willcoaloversupplyre-emergein2019,causingasignificantpricecorrection?No.Webelievecoalcompaniesrealisedcoalpricesin2019willcorrectonlyRmb30/t(5%YoY)and hover at the same level for the next few years. We think the mark