20210223-招银国际-新天绿色能源-00956.HK-Heading_towards_further_re-rating_opportunities_6页_976kb

CMB International Securities | Equity Research | Company Update Summary

Core Content Overview

This report provides an analysis of Suntien Green Energy (956 HK), focusing on its financial performance, valuation, and potential for re-rating in the context of the 2022 Beijing Winter Olympics. The report also includes comparative data with peers in the wind and gas sectors and outlines the company's financials and key ratios.

Main Points and Key Information

1. Earnings and Performance Outlook

• 2020E Earnings: Suntien's earnings are expected to grow by 3.9% YoY to RMB1,396mn, but the performance was slightly below estimates due to weaker wind resources and the impact of COVID-19.
• 2021E Earnings: Expected to grow by 21.2% YoY to RMB1,692mn, driven by wind farm capacity additions and a recovery in gas dollar margin with normalized LNG prices.
• 2022E Earnings: Projected to increase further by 8.9% YoY to RMB1,843mn.

2. Valuation and Re-rating Opportunities

• Valuation: Suntien's P/E and P/B ratios are 4.8x / 0.55x and 4.4x / 0.50x for 2021E, significantly lower than its peers.
• Re-rating Catalyst: The company is the largest wind operator in Hebei, providing 3.8GW wind capacity and is a key renewables energy supplier for the 2022 Beijing Winter Olympics, which is expected to boost market sentiment.
• Target Price: Increased from HK$2.50 to HK$3.26, reflecting a +27.3% upside.

3. A-Share Placement

• Placement Proposal: Announced in December 2020, aiming to raise RMB5.1bn through the issuance of 1.15bn new shares.
• Dilution: Potential dilution up to 23.1%, but the actual impact is expected to be significantly lower.
• Impact: The placement is expected to boost trading liquidity for Suntien-A and attract market attention for Suntien-H.

4. Financial Summary

• Revenue: Expected to grow from RMB9,975mn (FY18A) to RMB16,365mn (FY22E), with a CAGR of 19.3%.
• Net Income: Projected to rise from RMB1,240mn (FY18A) to RMB1,843mn (FY22E), with a CAGR of 14.8%.
• EPS: Expected to grow from 0.33 (FY18A) to 0.48 (FY22E), with a CAGR of 19.3%.
• Dividend Yield: Expected to increase from 5.9% (FY18A) to 7.9% (FY22E).
• ROE: Expected to rise from 12.4% (FY18A) to 11.4% (FY22E).

5. Valuation Analysis

• SOTP Valuation: The total equity value is estimated at RMB11,164mn, with a per share value of HK$3.26.
• Segment Valuation:
  • Wind & Solar: DCF valuation at RMB38,069mn, with a per share value of HK$9.89.
  • Piped Gas Supply: Valued at RMB9,368mn using a 12x P/E multiple, with a per share value of HK$2.43.
• Net Debt: Estimated at RMB33,101mn, which is 8.60 per share.
• Minority Interest: Estimated at RMB3,173mn, which is 0.82 per share.
• Renewable Green Bond: Estimated at RMB1,500mn, which is 0.04 per share.

6. Comparative Analysis

• Valuation Lag: Suntien's valuation is significantly below that of its peers.
• Sector Average:
  • P/E: 17.43 for 2020E and 15.41 for 2021E.
  • P/B: 2.04 for 2020E and 1.61 for 2021E.
• Key Peers:
  • China Longyuan-H (916 HK): Market cap RMB79,903mn, P/E 17.97, P/B 1.45.
  • China Datang C-H (1798 HK): Market cap RMB10,739mn, P/E 9.34, P/B 0.67.
  • CGN New Energy-H (1811 HK): Market cap RMB7,981mn, P/E 27.83, P/B 1.84.
  • Concord NE (182 HK): Market cap RMB4,187mn, P/E 19.79, P/B 2.99.

7. Market Performance

• Share Price Movement: Over the 12-month period, the share price has grown by 33.3% in absolute terms and 20.1% relative to the market.
• Shareholding Structure: HECIC holds 48.7%, and the free float is 51.3%.

8. Key Ratios

• Sales Mix:
  • Wind & Solar: Expected to remain at ~36% of total revenue.
  • Natural Gas: Expected to be ~64% of total revenue.
• Profit Margins:
  • Gross Profit Margin: Expected to remain ~28%.
  • Operating Margin: Expected to rise to 25.6% in 2022E.
  • Net Margin: Expected to rise to 12.0% in 2022E.
• Liquidity Ratios:
  • Current Ratio: Expected to rise to 0.82 in 2021E.
  • Quick Ratio: Expected to rise to 0.81 in 2021E.
  • Cash Ratio: Expected to rise to 0.29 in 2021E.
• Debt Ratios:
  • Total Debt/Equity Ratio: Expected to rise to 199.2% in 2022E.
  • Net Debt/Equity Ratio: Expected to rise to 240.6% in 2022E.

Conclusion

The report concludes with a BUY rating, suggesting that Suntien Green Energy has potential for significant returns over the next 12 months. The company is positioned to benefit from the 2022 Beijing Winter Olympics and is expected to resume earnings growth and see a re-rating as market sentiment improves. The SOTP valuation of HK$3.26 reflects a 30.4% increase from the previous target price, indicating a positive outlook for the company's future performance.