SDIC Power Alert:Results in line;95%earnings from hydro发布时间：2017-04-18 研究机构：德意志银行
SDIC’s FY16 reported net profit down 28% yoy to Rmb3.9bn and recurring profit dropped 23% yoy to Rmb4.3bn, in line with DBe. DPS was Rmb0.2/sh, implying a 35% payout and a 3% yield. We believe SDIC is better positioned than thermal power peers due to its 60% capacity exposure to hydropower (95% profit contribution in FY16). As such, we view SDIC as a largely hydro play trading at undemanding 12.5x 2017 P/E, maintain Buy with TP of Rmb8.3.
2016 results in line; 95% of recurring profit from hydro business.
SDIC's recurring net profit was down 23% to Rmb4.3bn (after adding back one-off items mainly Rmb516mn provision on guaranteed loan of Qujing company). Net output rose by 6% yoy (thermal: +1%, hydro: +8%) with utilization dropped by 2% yoy to 4,308 (thermal: -10% to 3,701; hydro: +5% to 4,822), but was offset by a 11% yoy drop in avg. tariff (thermal: -13%; hydro: -10%). Unit fuel cost for thermal was largely flat yoy but the cost in Dec was about 30% higher than FY16 average. More than 95% of the recurring earnings came from hydro business. For thermal plants, profits from plants in Tianjin, Anhui, Fujian were largely offset by losses in Gansu, Xinjiang and Yunnan.
Focus more on non-thermal business.
As of end-2016, SDIC has 8.8GW under construction, of which 4.5GW is hydro, 4GW is thermal and 0.3GW is wind. Mgmt expects 2x1GW Tianjin Beijiang project and 2x1GW Fujian Meizhouwan project to be operational in 3Q17 (some delay vs. plan). Beyond 2017, mgmt expects no more thermal projects to be added before 2020 while planning 1GW wind and solar capacity additions in Yalongjiang area by 2020. In addition, its 42% owned thermal project in Indonesia was just into operation with better-than-expected returns. Mgmt expects offshore wind projects in UK to commence operation in 2019.
Higher market-based volume with less DPS discount for both thermal & hydro.
In 2016, market-based volume accounted for 13% of total power outputs with discounts of Rmb3-5cents/kWh for most projects. In 2017, mgmt expects a gradual increase of the market-based volume mix (20% in 1Q17), but the discount should be less as a result of higher coal prices. In 1Q17, Ertan and Tongzilin hydro projects increased the portion of the market-based volume (sold to Sichuan and Chongqing) whose settlement tariff is only Rmb0.25/kWh.
Lower 2017/18E earnings by 6/1% with TP unchanged (Rmb8.3), Maintain Buy.
We tweaked our 2017/18E net profit by -6/-1% to reflect project delays and lower tariff for its hydro units due to higher market-based volume, but partly offset by lower depreciation/ financial cost. Our DCF-based TP of Rmb8.3 (WACC 7%, TGR 0%) is unchanged as profit beyond FY18 is slightly raised due to lower hydro DPS tariff discount after an expected thermal tariff hike at end-FY17.