Guotai International has published a research report initiating coverage on JNCEC (00579) with a "Buy" rating and target price of HK$3.20. The firm forecasts the company's net profit for 2025/26/27 at RMB 3.46/3.78/4.14 billion respectively, corresponding to EPS of RMB 0.42/0.46/0.50. The company announced a three-year dividend plan with payout ratios of 42%/44%/46% of distributable profits for 2025/26/27. At current share price, the stock trades at 5.6x 2025E PE with a dividend yield of 7.6%, representing relatively low valuation among Hong Kong-listed power companies. The firm believes the company possesses high-quality projects with attractive dividend yield, and current valuation offers upside potential.
Guotai International's key investment points are as follows:
**Company Holds High-Quality Renewable Energy Projects, Continuously Expanding Strategic Emerging Projects and Market Coverage**
Growth in wind and solar renewable energy capacity serves as the primary driver for the company's performance growth. From 2020-24, the company's wind/solar segments achieved operating profit CAGR of 27.9%/9.4% respectively. In 2024, wind/solar power generation contributed 48%/28% of the company's operating profit respectively. Having cultivated in the green power sector for many years, the company holds high-quality project resources with under-construction and pipeline projects exceeding 12GW capacity, demonstrating abundant resource reserves. The company emphasizes strategic emerging project expansion, capitalizing on opportunities in green power transmission to Beijing, large-scale base projects, pumped storage, and offshore wind power to secure quality projects. The company is entering new regional markets to expand its nationwide presence. The firm expects the company's green power business segment to maintain sustained growth, driving steady improvement in overall corporate performance.
**JNCEC is the Leading Gas-fired Cogeneration Company in Beijing**
The company owns and operates 8 gas-fired cogeneration power plants in Beijing and Yichang, Hubei. Seven plants are located in Beijing with total installed capacity of 4,702MW. In 2024, the company's Beijing gas-fired power plants generated 18.96 billion kWh, accounting for 43.9% of Beijing's total power generation, and supplied 27.334 million GJ of heat, representing over 43% of Beijing's centralized heating supply. According to company announcements, JNCEC is the leading gas-fired cogeneration company in Beijing. The company's Beijing gas-fired plants maintain strategic cooperation with Beijing Gas Group, ensuring stable pipeline gas supply with minimal price volatility. On-grid electricity prices remain stable, guaranteeing reasonable profit margins. Heat sales are primarily connected to Beijing's centralized heating network, providing stable revenue contributions over many years. Gas-fired cogeneration plants contribute 60% and 22% of the company's revenue and operating profit respectively, serving as important sources of stable profits and cash flow.
**Renewable Energy Generation Gradually Becoming China's Primary Power Source with Rapid Market-oriented Development**
China's total electricity consumption grew 6.7% and 6.8% year-over-year in 2023 and 2024 respectively. The China Electricity Council forecasts 2025 electricity consumption growth at 5%-6%, maintaining relatively rapid growth. Renewable energy installed capacity has surpassed thermal power, with wind and solar generation accounting for approximately 20% of total power generation. Earlier this year, the National Development and Reform Commission and National Energy Administration issued "Document No. 136," promoting comprehensive marketization of renewable energy generation. The policy categorizes renewable energy projects into existing and incremental projects with differentiated approaches. Existing projects receive earnings protection while incremental projects introduce competitive mechanisms to reduce energy costs. The firm believes that renewable energy generators' invested project returns are protected, while for new investment projects, power companies will evaluate factors including regional power supply-demand dynamics, resource advantages, and generation hours for optimal selection. The renewable energy generation industry is entering a high-quality development phase. JNCEC has deep expertise in Beijing's power market with abundant high-quality project resources, providing competitive advantages.
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