2023-02-02 16:30:13 和讯  中信证券LI Xiang
  Core views:
  In 2022, China Three Gorges Renewables (CTGR) generated 48.4bn kWh of electricity, up 46.2% YoY. Benefiting from the scrambling installation of offshore wind power and parity project put into production, CTGR achieved a high increase in power generation, especially offshore wind power generation, which surged by 240.3% YoY. The mid/upper stream prices of the PV industry are trending down, and CTGR is likely to benefit from both the rate of return and growth. Massive wind and solar power facilities projects gradually become the mainstream, and relying on resources and capital advantages, the Company is likely to accelerate the growth of installation. We maintain our 2022E~2024E EPS forecasts of CTGR at Rmb0.29/0.37/0.47 and maintain the “BUY” rating with a target price of Rmb7.40.
  In 2022, electricity generation of 48.4bn kWh came in line with expectation. CTGR announced 2022 electricity generation at 48.4bn kWh (+46.2%YoY), in line with expectations, of which onshore wind/offshore wind/solar power generate 22.6bn/11.3bn/13.4bn kWh (+16.2%/+240.3%/+41.5%YoY) respectively. By quarter, the Company achieved 13bn kWh (+43.1%YoY) of electricity generation on 4Q22, of which onshore wind/offshore wind/solar power electricity generation increase by 7.6%/286.4%/28.8% YoY respectively.
  Capacity expansion drives up electricity generation, offshore wind power continues the trend of high growth. In the first 11 months of 2022, the average utilization hours of wind/solar power in China changed by -1.1%/+5.5%, which means CTGR was less affected by fluctuations in wind and solar resources, and the high growth rate mainly benefited from the tide of offshore wind power installation and affordable land-based photovoltaic (PV) projects that continue to be put into production. Offshore wind power staged rosy performance. At the end of 2021, CTGR completed more than 2.8mn kW offshore wind projects, boosting annual offshore wind power output by 240.3% to 11.3bn kWh. We expect the segment to keep contributing incremental output in 2023, considering that the new offshore wind stations did not reach full capacity in 2022. Currently, CTGR is actively promoting the development of offshore wind power projects including Qingzhou#5~#7 projects. It is likely to achieve the expansion of offshore wind installed capacity and consolidate the leading position in the sector, relying on its rich development and operation experience in the field and advantages in financing costs and shareholder resources.
  PV industry chain price reduction brings industry β opportunities. With enhanced expectations of capacity expansion in upstream and midstream of the PV industry chain and the marginal weakening of overseas demand, the overcapacity in the industry chain is gradually moving from expectations to reality. The prices of upstream and midstream products such as monocrystalline silicon, silicon wafers and cells start to decline. We expect module prices to return to the downward path in 2023, boosting the return rate of concentrated PV power plant and providing incentives for new energy operators to accelerate investment in new projects. CTGR currently has ample project pipeline and is poised to benefit from the value chain price decline and achieve rapid expansion of capacity on the basis of secured return on investment of the projects.
  The efforts to build massive wind and solar power facilities continue, and CTGR has resources and capital advantages. In China’s efforts to build massive wind and solar power facilities/bases in Gobi and desert areas, the requirement for integrated development and high capital threshold will make the project resources gradually incline to the central enterprises of power generation. As the new energy operation leader, CTGR is likely to acquire advantages based on financial strength, development capacity and the support from its controlling shareholder Three Gorges Group. So far, CTGR has launched the first 10MW-level massive base project in China, a renewable energy base located in the Ordos Kubuqi Desert. It plans to build 400/800/400MW of wind power/PV/coal power for peak shaving capacity. We expect that as PV module prices return to the downward path, CTGR will accelerate the development of massive wind and solar power facilities projects in hand.
  Potential risks: Less-than-expected capacity growth of the Company; on-grid electricity prices and project cost fluctuations; less-than-expected subsidy recovery of CTGR; high capital expenditure exerting financing pressure.
  Investment recommendation: Considering that CTGR 's electricity generation in 2022 is in line with expectations, we maintain our 2022E~2024E EPS forecasts at Rmb0.29/0.37/0.47, corresponding to 20x/16x/12x PE. Considering the average valuation of comparable new energy companies (Longyuan Power, Suntien Green Energy, GCL Energy Technology, CSG Energy Efficiency & Clean Energy) at 19x 2023E PE based on Wind consensus expectations, and that CTGR is growing more strongly, we believe it warrants modest valuation premium and assign 20x 2023E PE to derive a target price of Rmb7.40. Reiterate the "BUY" rating.
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