SDIC Power Holdings:Hydro holds steady/coal-fired declines in H1;transfer of coal-fired plant to help profitability发布时间：2016-08-30 研究机构：瑞银证券
H1 net profit ex. one-offs fell 16% YoY due to declines in volume/tariffs.
SDIC Power announced its H116 results: net profit fell 39% YoY to Rmb1.49bn, mainlydue to the company's provision of Rmb530m for expected liabilities on subsidiary SDICQujing's overdue debt. Net profit excluding one-offs fell 16% YoY to Rmb2.03bn,mainly caused by declines in power generation volume and on-grid tariffs.
Steady growth for hydropower but sharp decline for coal-fired business.
SDIC Power expanded its installed capacity 5% YoY and generated power of 51.1bnkWh in H116 (-2.0% YoY; -4.2% YoY in Q216), mainly due to maintenance of theJinping-Sunan DC transmission line (outbound transmission channel for Yalong River) inApril. Hydro power generation increased 4.3% YoY, with Yalong River hydro power up7.3% YoY. Coal-fired power generation declined 12.4% YoY in H116, mainly due toweak demand for electricity and good water inflow for hydropower, although thedecline was smaller in Q216 (-5.3% YoY). The company's hydro/coal-fired powercapacity utilisation hours were 1,995/1,914 in H116 (+24 hours/-276 hours YoY), 337higher/50 lower, respectively, than the national average. Due to coal-fired tariff cuts,the company's average on-grid tariff fell Rmb0.033/kWh YoY to Rmb0.306/kWh inH116.
Coal-fired transfer to help profitability; focus on tariff cut/overseas expansion.
On 27 Aug, SDIC Power announced a transfer of the coal-fired plant of SDIC Nanyang,in which it has a 51% stake, to Zhongyu Guoxin. The coal-fired plant has plannedinstalled capacity of 2GW and is scheduled to come on-stream in 2017. The companycould realise a gain of Rm88.18m from the transfer. In our view, the downsizing ofcoal-fired installed capacity will help the company reduce exposure risk for its coal-firedbusiness and increase the weighting and profitability of its clean energy business. As atend-H116, non-coal-fired installed capacity accounted for 64% of the company's totalinstalled capacity, the highest among independent power producers. We believeinvestors need to focus on the following: 1) the magnitude of the on-grid tariff cut oninter-regional transmission for hydropower stations on the Yalong River: the company islooking for an average cut of below Rmb0.03/kwh; and 2) the progress of overseasexpansion.
Valuation: Maintain Buy rating.
We maintain our Buy rating and sum-of-the-parts based PT of Rmb9.50.