Yangtze Power (600900) Company In-depth Report: Leaders of the World Hydropower Industry Value and Growth

Yangtze Power (600900) Company In-depth Report: Leaders of the World Hydropower Industry Value and Growth
Company profile: World leader in hydropower industry.The company’s installed hydropower capacity ranks first in the world, and has the permanent right to use China’s best water energy.Power generation in 2018 was 2154.8.2 billion kWh, accounting for 17 of the country’s hydropower generation.48%.As of the semi-annual report of 2019, the top five shareholders of the company are the Yangtze River Three Gorges Corporation (shareholding ratio 57).92%), Hong Kong Securities Clearing Corporation Limited (5.46%), China Ping An Life Insurance-Traditional-General Insurance Products (4.49%), Yunnan Energy Investment Group Corporation (4.00%), China Three Gorges Construction Management Corporation (4.00%). Company business: In the first half of the year, the water supply was relatively abundant, and electricity prices remained stable over the years.1) Power station assets: Currently there are 4 hydropower stations in operation, and the scale of the Three Gorges Power Station is the largest in the world.As of the end of 2018, the company operated and managed the four giant generators of the Three Gorges, Gezhouba, Xiluodu and Xiangjiaba, with a total installed capacity of 4,549.50,000 kWh, accounting for 12 of the country’s total installed hydropower capacity.9%.2) Electricity: The fluctuation is relatively small, and the water in the first half of this year has been abundant.In 2018, the company’s online power consumption increased by 2 every year.19% to 2142.2.4 billion kWh, all for hydropower.In the second quarter of 2019, the company’s power generation increased by 5 per year.17% to 492.1.1 billion kWh; in the first quarter of 2019, the company’s power generation increased by 4 per year.78% to 361.7.8 billion kWh.The company’s hydropower generation in 2017?Annual growth of 2 in 2018.3%, 2.2%, proportional to other hydropower companies, the fluctuation of incoming water is maximized and stable.Small and medium-sized hydropower companies have relatively interference in incoming water fluctuations.3) Electricity consumption and electricity price: In 2018, the market electricity accounted for 11%, and the on-grid electricity price remained stable.Since 2017, the company’s market share of electricity has maintained a rapid upward trend.The company’s market-based trading power in 2018 increased by 42 every year.7% to 236.100 million kilowatt-hours; the market share of electricity increases by 3 per year.1 up to 11.02%.While the market share of electricity increased, the company’s average on-grid electricity price remained stable after a significant increase in 2016.2015?In 2018, the company’s on-grid electricity prices were 255.82, 276.80, 276.78, 276.86 yuan / MWh, basically stable after 2016. Growth analysis: Five factors have caused Yangtze Power to continue to grow for many years.1) Injection of projects under construction: Baihetan, Wudongde injection increased the company’s installed capacity by 58%.Baihetan and Wudongde will increase the company ‘s installed capacity by 26.2 million kilowatts, an increase of 58%.Wudongde has a planned installed capacity of 10.2 million kilowatts. It is estimated that from July 2020 to December 2021, the units will be put into production one after another.The planned installed capacity of Baihetan is 16 million kilowatts. It is estimated that from July 2021 to March 2023, the units will be put into production one after another.  2) Investment and financing business: Obtain high-quality strategic resources and create new profit growth points.The company’s investment targets are mainly hydropower, thermal power and other energy companies, local power grid distribution companies, and overseas energy companies.2016?In 2018, the company’s net investment income as a percentage of operating profit increased year by year, reaching 6 respectively.0%, 8.5%, 9.9%.Return on investment performance has the effect of smoothing performance.With no increase in installed capacity, investment income provides a new growth point for performance.One of the strategic synergies: power distribution business.Strategic synergy 2: Promote joint dispatch of hydropower resources in the middle and upper reaches of the Yangtze River.The third strategic collaboration: exporting the core capabilities of large-scale generator operations overseas.3) Cascade dispatching: 42 billion kilowatt-hours of space for additional water saving in the long run.In 2018, the company optimized the joint dispatch. During the main flood season, the Three Gorges Power Plant achieved full output of 352 hours, Xiangjiaba Power Station operated at full output of 738 hours, and Xiluodu Power Plant operated at full capacity of 1,170 hours. Cascade generators gradually saved water and increased production by 99.300 million kilowatt-hours, the increase rate of water energy utilization to 4.91%, reducing the loss of abandoned water.In the medium term, the Wudongde and Baihetan Hydropower Plants are expected to start generating electricity in 2020, and the “Six Reservoir Joint Commissioning” will begin to play a role, and it is expected to increase the annual power generation by about 30 billion kilowatt hours.In the long run, if the joint optimal dispatch is implemented in the upper reaches of the Yangtze River, it will further increase the annual power generation in the river basin by about 42 billion kWh.4) Decrease of interest expenses: sufficient cash flow to repay interest and taxes and reduce financial expenses.In the case of the company’s net cash flow from operating activities, which satisfies the investment, payment of dividends and interest, 2017?In 2018, interest-bearing liabilities were reduced by 62.7, 95.0 million.  Company interest expense in 2018 59.2 ppm, accounting for 22% of total profit for the year.The company had interest-bearing debt of 1,294 trillion at the end of 2018, and reduced interest-bearing debt by 95 million that year.Interest has been denied within 6 years.5) Depreciation decline: The useful life is far beyond the depreciation life. According to the current depreciation rate, there are 20 years of depreciation.At the end of 2018, the original value of fixed assets was US $ 333.7 billion, the net value of fixed assets (original value-progressive depreciation) was US $ 237.9 billion, and depreciation was 12.2 南宁桑拿 billion yuan (80% of total profit).So the average depreciation period is 3337/122 = 27 years, and according to the current depreciation rate, there is still 2379/122 = 20 years of depreciation.Specifically, among the original value of fixed assets, water-retaining buildings (dams) account for 43%, and the depreciation period is 44 years; houses and buildings account for 27%, and the depreciation period is 36 years; machinery and equipment account for 30%, and the depreciation period is 16 years. Earnings forecast and estimation level: Strongly recommend rating for the first time.1) Relative estimation: PE and PB are higher than the industry average, but the dividend yield is leading.Judging from comparable company estimates, Yangtze Power 2019?PE and PB will be 17 in 2020.8, 17.8, 3.05 times, higher than the price-earnings 杭州龙凤桑拿网 ratio of comparable companies (14?15 times), the average P / B ratio is 1.8 times.Derivative implants calculated by the company using 2018 dividends3.6%.2) Absolute estimation: excluding the Wubai power plant injection, the FCFE estimation result is 22.97 yuan / share.As of September 21, Shanghai Stock Connect held Yangtze Power5.67% of the stock has become one of the important investors.Changes in investor structure have led to discussions on the Yangtze River power estimation method.In addition to relative estimates, overseas investors are also very concerned about absolute valuations.Yangtze Power’s current company free cash flow FCFF at 280?About 32 billion.The perpetual benefit is 0 and the WACC is 5.The assumption of 7%, Yangtze Power FCFF estimate is 22.97 yuan / share. Investment suggestion: a model of value, a leader in the world’s hydropower industry, for the first time to provide a deep recommendation level.Expected company 2019?The EPS in 2021 will be 1.06, 1.06, 1.07 yuan, the corresponding price-earnings ratio increased by 17.7 times.The company’s 2019 dividend yield is expected to reach 3.6%, which is at the leading level among comparable companies.The perpetual benefit is 0 and the WACC is 5.7% of the assumptions, the Yangtze Power FCFF estimate is 23.72 yuan / share.Baihetan and Wudongde will increase the company ‘s installed capacity by 26.2 million kilowatts, an increase of 58%, and it is estimated that there is still room for improvement. Risk Warning: Incoming water conditions may be lower than expected; on-grid electricity prices may drop unexpectedly, etc.