Yangtze Power (600900): Investing again to integrate large river basins

Yangtze Power (600900): Investing again to integrate large river basins
Event: Yangtze Power issued an announcement to acquire 23% equity of Yunnan Huadian Jinshajiang Midstream Hydropower Development Co., Ltd. (referred to as “Jinzhong Company”) for sale through Shanghai United Assets and Equity Exchange.9.8 billion yuan.After the completion of this investment, the company will become the second shareholder of Jinzhong Company. The target company owns the assets of the midstream of the Jinsha River, and the profit has improved significantly: Jinzhong was established by the State Council 夜来香体验网 in 2005 and is mainly responsible for the development and construction management of the Jinsha River midstream cascade power plant. It has a strategic significance in hydropower development planning.The hydropower planning of the middle reaches of the Jinsha River is a cascade development plan of a reservoir and eight stages.Jinzhong Company is responsible for the wholly-owned development and operation of the upper four-stage generator in the middle reaches of the Jinsha River (Longpan, Yiyiren, Liyuan, Ahai), and shares in the lower four-stage generator in the middle reaches of the Jinsha River (Jin’an Bridge, Longkou, LuDila, Guanyin Rock).As of 2019Q1, the company holds 4.4 million kilowatts of installed capacity in operation, with a total of 558 equity installed capacity.920,000 kilowatts.Along with the expected improvement 武汉夜网论坛 in the supply and demand of Yunnan Electric Power, the opening of the superimposed delivery channel, the power consumption situation of Jinzhong Company improved, and it turned around in 2018, achieving net profit in the first three quarters of 20193.300 million, ROE rose to 4.2%.Taking into account the long-term long plate and the commissioning of regional power plants, the installed capacity of Jinzhong will increase by 1.6 times, considerable profit space. Invest in non-listed assets, and the purchase price is generally reasonable: Most of the hydropower targets invested by Yangtze River Power in the early stage are listed companies (such as SDIC Power, Sichuan Investment Energy, etc.), and the Jinzhong company this time is an unlisted company.Further expansion.Calculated based on the net assets of the property right base date (2018/12/31) as the base, this acquisition of PB is about 2.8 times.With the estimated secondary market hydropower assets in which the company previously participated, the acquisition of PB is at a relatively high level.Compared with the valuation ratio of Jinzhong’s previous equity transfers since 2018, the acquisition of PB is generally reasonable. The integration of water resources in the Yangtze River Basin and the advantages of regional synergy: the integration company benefited from the joint cascade operation of the reservoir holding power generation assets, and the added value was considerable.In the democracy in the middle and upper reaches of the Yangtze River, the company has already invested in SDIC Power and Sichuan Investment Energy (the two major shareholders of Yalong River Hydropower).Through this acquisition, the company will further realize regional coordinated development through equity bonds. Profit forecast and investment rating: Maintain the profit forecast. It is estimated that the company’s net profit attributable to mothers in 2019-2021 will be 23, 23.3, and 23.4 billion yuan, respectively, and EPS will be 1.04, 1.06, 1.07 yuan, currently corresponding to the corresponding PE is 18, 17, 17 times, the corresponding PB is 2 respectively.7, 2.6, 2.4 times. Maintain the “overweight” rating. Risk reminder: incoming water exceeds expectation, comprehensive on-grid electricity price exceeds expectation, comprehensive financing cost rises above expectations, investment progress and investment income exceed expectations, etc.