类别:公司 机构:中国国际金融股份有限公司 研究员:Jiani LIU/Tao ZENG 日期:2022-05-07

2021 results outperforming; 1Q22 results beat our expectations

    Mengdian Huaneng Thermal Power (NMHD) announced 2021 and 1Q22 results. In 2021, revenue grew 23.3% YoY to Rmb18.93bn, and attributable net profit dropped 40.4% YoY to Rmb452mn. Due to high coal prices, the company's power generation business missed our expectations but remained profitable, significantly better than losses seen in the industry. In 1Q22, revenue rose 44.7% YoY to Rmb5.49bn, and attributable net profit surged 188.3% YoY to Rmb496mn. Higher production volume and prices in the power generation business, and higher coal sales volume drove the upside earnings surprise, in our view.

    Coal-electricity integration and new energy projects were the profit driver in 2021. Earnings were mainly from: 1) Weijiamao Coal and Power contributed Rmb1.48bn of attributable net profit, up 149% YoY. Prices of electricity fell, but coal sales volume and price both increased 10.5% and 86.1% YoY; 2) As a subsidiary of NMHD, Longyuan Wind Power’s profit reached Rmb461mn, up 382% YoY; 3) the two Shangdu Power projects profit totaled Rmb113mn, up 382% YoY; and 4) profit from the new Wudalai wind power project reached Rmb121mn.

    1Q22 profit exceeded expectations; power generation business improved, with rising sales volume and price. Although the unit price of standard coal is still at a high level (up 31% YoY), the power generation business started to recover. In 1Q22, power generation volume increased 15.5% YoY. Thanks to the market-based electricity price mechanism, the average electricity price rose 36.5% YoY, with a significant increase for energy-intensive users. The company also supported the Weijiamao integration project to maximize its profit by reducing coal export to increase power generation volume under the favorable electricity price.

    Trends to watch

    Weijiamao project approved in April to increase production capacity; land and environmental impact assessment in progress. The company received approval in late April to increase the production capacity at the Weijiamao coal mine to 12mnt per year from 6mnt per year. The company already has the capacity, but still needs to carry out land and environmental assessment work. We expect profits from the project to grow within the year.

    The 14th Five-Year Plan targets new installed capacity of 8-10GW; newly approved 850,000KW of photovoltaic (PV) project to start construction within 2022. Relying on the subsidiary Juda and Linling, the company has obtained the approved scale of 850,000KW of PV and is preparing to start construction. From 2021-2025, the company likely will continue to expand its new energy business. We expect that half of the company's installed capacity will come from wind and solar power projects by 2025.

    Financials and valuation

    Given the higher electricity price and volume and coal mine capacity, we raise our 2022 net profit forecast 218.7% to Rmb2.79bn and introduce our 2023 net profit forecast of Rmb3.43bn. The stock is trading at 8.4x 2022e P/E and 6.8x 2023e P/E. Considering higher earnings assumptions and the general downward revision of power stock valuations this year, we maintain an OUTPERFORM rating and raise our TP 78.6% to Rmb4.54 (implying 10.6x 2022e and 8.6x 2023e P/E), with 26.7% upside.


    Lower-than-expected electricity demand in western inner Mongolia.