Huaneng International: decrease of coal price offsets the im

In the first three quarters, the net profit attributable to the parent company of high-quality thermal power companies nationwide increased by 171%. Huaneng world is the largest listed thermal power company in China, with a holding installed capacity of 105991mw. In recent years, the company’s revenue has been steadily increased, clean energy has been rapidly developed, and the power supply coal consumption and plant utilization rate have gradually declined. The company has a large number of large thermal power units and thermal power units. Under the background of gradual progress of power market, it has strong bargaining power in the future. In 2019, the coal price continued to decline, the company’s earnings fluctuated greatly and improved, and the net profit attributable to the parent increased by 171% in the first three quarters.

 

 

 

The long-term trend of electricity consumption addition remains unchanged, and the impact of the new electricity price policy on electricity price is about 1%. At present, the rapid increase of the third industry and residential power consumption drives the continuous increase of the overall power consumption; China’s electrification rate will continue to increase, and the economic growth rate will stick to 6%, and it is estimated that China’s power consumption will stick to about 5% growth in the next three years. It is estimated that there is still room to increase the utilization hours of thermal power in the next three years, and the utilization hours are estimated to increase by 66 hours in 2020. With the increase of market share, the thermal power price of the company is firm, and under the new policy of “benchmark + floating”, the overall price of coal power is estimated to decline by about 1%.

 

 

 

It is estimated that the coal price will drop by 50 yuan / ton in 2020, which can completely offset the impact of the new policy. China’s output value and import growth rate of power coal are larger than that of thermal power generation, and supply and demand are in a loose situation. As the economic growth rate declines, the overall demand for coal declines; the price difference between domestic and foreign power coal continues to expand to more than 80 yuan / ton, further placing pressure on the domestic power coal price. We estimate that the average price of coal will drop by 50 yuan / ton in 2020, which can completely offset the impact of the new deal. According to the calculation of 306g / kWh of coal consumption, the cost of coal consumption will be reduced by 3.6%. Therefore, the coal price drop of 11.8 yuan can completely offset the impact of the new policy on the world coal price of Huaneng. The correlation between the company’s coal price and the national coal price index is high. We estimate that if the national coal price index drops by 40 yuan, the company’s net profit in 2019 will increase by 2.626 billion yuan (109%).

 

 

 

The valuation is expected to improve and the 19-year dividend rate is expected to reach 4.6%. At present, the company’s PB valuation is only 1.15 times, at a historical low point. After the reform of electricity price system, the transmission of thermal power cost will be more smooth, the surplus will be more stable, and the valuation level is expected to return to the property of public utilities, which is estimated to be increased to 1.4-1.6 times. After the company’s 2019 dividend announcement, the dividend ratio of a shares will exceed 4.6%, and that of Hong Kong shares will exceed 7%.

 

 

 

Danger tip: under the new policy, the coal electricity price is in danger of falling sharply; the fluctuation of power coal price is less than the expected danger; the fluctuation of electricity consumption is in danger of slowing down; the danger of lifting the ban on restricted shares; the risk of asset impairment exceeding the expected danger.