Guozheng International: First time gives JNCEC a "Buy" rating with a target price of HKD 3.20

According to the Zhitong Finance APP, Guozheng International has released a research report stating that it has initiated a "Buy" rating for JNCEC (00579) with a target price of HKD 3.20. The bank predicts the company's net profit for 2025/26/27 to be RMB 3.46 billion / 3.78 billion / 4.14 billion, corresponding to EPS of 0.42 / 0.46 / 0.50 yuan. The company has announced a three-year dividend plan with dividends for 2025/26/27 being 42% / 44% / 46% of distributable profits. Currently, the stock price corresponds to a forecast PE of 5.6 times for 2025, with a dividend yield of 7.6%, indicating a relatively low valuation among power stocks listed in Hong Kong. The bank believes the company's projects are of high quality, with a high dividend payout, and that there is room for valuation improvement. Guozheng International's main viewpoints are as follows: The company holds high-quality renewable energy projects and continues to expand new strategic emerging projects and market areas. The growth of installed capacity in renewable energy such as wind and solar power is the driving force behind the company's performance growth. From 2020 to 2024, the company's operating profit CAGR for the wind and solar sectors reached 27.9% / 9.4%. In 2024, wind and solar power generation will contribute 48% / 28% to the company's operating profit. The company has been deeply involved in the green electricity field for many years, holding high-quality project resources, with installed and reserved projects exceeding 12GW, ensuring ample resource reserves. The company emphasizes the expansion of strategic emerging projects, focusing on landing high-quality projects in areas such as green electricity entering Beijing, large base projects, pumped storage, and offshore wind power. The company is entering new regional markets to expand its national layout. It is expected that the company's green electricity sector will continue to grow, thereby driving steady improvement in the company's overall performance. JNCEC is a leading enterprise in gas-fired cogeneration in the capital. The company owns and operates eight gas-fired cogeneration power plants in Beijing and Yichang, Hubei. Seven of these are located in Beijing, with an installed capacity of 4,702 MW. In 2024, the company's gas power plants in Beijing will generate 18.96 billion kWh, accounting for 43.9% of the power generation in the Beijing area; the heat supply will be 27.334 million GJ, accounting for over 43% of Beijing's centralized heating supply. According to the company's announcement, JNCEC is the leading enterprise in gas-fired cogeneration in the capital. The company's gas power plants in Beijing have a strategic cooperation with Beijing Gas Group, ensuring stable pipeline gas supply and minimal price fluctuations; the on-grid electricity price is stable, ensuring a reasonable profit level. Heat sales mainly connect to Beijing's centralized heating network, contributing stable income for many years. The gas-fired cogeneration power plants contribute 60% of the company's revenue and 22% of its operating profit, serving as a stable and important source of profit and cash flow for the company. New energy generation is gradually becoming China's main power source, with rapid marketization. The annual growth rates of total electricity consumption for 2023 and 2024 are projected to be 6.7% and 6.8%, respectively. The China Electricity Council predicts that the annual growth rate of total electricity consumption will be 5%-6% in 2025, maintaining a rapid growth rate. The installed capacity of new energy generation has surpassed that of thermal power, with wind and solar power generation accounting for about 20% of total electricity generation. Earlier this year, the National Development and Reform Commission and the National Energy Administration issued Document No. 136, promoting the full marketization of new energy generation. This document categorizes new energy projects into existing and incremental projects for differentiated policy implementation. Existing projects ensure returns, while incremental projects introduce competitive mechanisms to reduce energy costs. The bank believes that the returns on invested projects by new energy generators are guaranteed, while for new investment projects, power generation companies will consider factors such as electricity supply and demand in the market, resource advantages, and generation hours for optimal selection The new energy power generation industry has entered a stage of high-quality development. JNCEC is deeply engaged in the capital's power market, with abundant high-quality project resources on hand and competitive advantages