Maintain "Buy" with a new SOTP-derived TP of HK$20.50 (0.7x 2024 PB for thermal; 7.5x 2024 PE for renewables). We fine-tuned our 2024 and 2025 EPS forecasts to HK$2.88 (+3.3%) and HK$3.49 (+1.8%), respectively. We introduce our 2026 EPS forecast of HK$3.84. We maintain "Buy" on the Company's solid low-carbon transformation outlook and its improved thermal business cash flows.
　　2023 earnings in line - China Resources Power ("CRP", or the "Company") recorded shareholders' profit of HK$11,003 mn, up 56.2% yoy, in line with our estimate. Total attributable operational generation capacity increased by 7,183 MW in 2023, among which 3,106 MW was from wind and 2,230 MW was from solar. Dividend payout ratio remained at 40% for 2023 and would reach 62% if including the special dividend for the 20th IPO anniversary.
　　Solid earnings outlook for thermal power: Taking into account capacity payment, which has become effective this year, CRP's management expects the Company's average coal power tariff in 2024 to be flat or slightly down yoy. However, further improvement in CRP's dark spread is possible, as the Company's management expects a further 3-5% decline in its 2024 average unit fuel cost (in 2023, CRP's unit fuel cost went down 12.6% to RMB296/ MWh, in line with our expectation). In 2024, CRP plans to add around 927 MW of attributable thermal power capacity.
　　Ambitious renewable expansion plan for 2024: CRP plans to add 10 GW of renewables capacity in 2024 (vs. 5,336 MW in 2023) with a capex budget of HK$44.6 bn. While some investors have raised concerns over the financial burden brought by such expansion scheme (e.g. high gearing), we believe CRP is taking advantage of low-cost debt funding (CRP's effective interest rate was around 2.9% in 2023), while its improved thermal business can also act as a strong cash cow.
　　Risks: Delay in project roll-out, unfavourable policy changes, lower-than-expected power demand, higher-than-expected coal prices, and extreme weather conditions