What's new
Huaneng Power International announced operating data for 4Q19: Huaneng’s total power generation by power plants within China fell 0.9% YoY to 102.8bn kWh, and electricity sales volume rose 2.3% YoY to 100.2bn kWh. In 2019, the company’s total power generation by power plants within China fell 5.9% YoY to 405bn kWh, and sales volume dropped 4.4% YoY to 388.2bn kWh.
In 2019, Huaneng’s average on-grid electricity settlement price for its power plants within China fell 0.35% YoY to Rmb417.0/MWh. The company’s market-based electricity sold reached 216.4bn kWh, accounting for 56.4% of total electricity sold （12.9ppt higher than in 2018）.
Comments
Operating data for 4Q19 is in line with expectations. In 4Q19, the company’s electricity generation slipped 0.9% YoY and electricity sales volume rose 2.3% YoY, basically in line with our expectations.
Tax-exclusive electricity tariff rose YoY in 4Q19.
Valuation and recommendation
We keep our 2019 earnings forecast unchanged given the in-line electricity generation and sales volume data. To reflect the more optimistic expectation for coal price, and the assumption that downward pressure on electricity tariff will mainly be borne by coal producers （coal price cuts） and power grid operators （lower profit）， we raise our 2020 earnings forecast 4% to Rmb8bn, and introduce 2021 earnings forecast at Rmb9.6bn.
Huaneng-A is trading at 11.0x 2020e P/E and 1.0x 2020e P/B.Maintain OUTPERFORM rating and TP of Rmb8.29, implying 16.3x 2020e P/E and 1.5x 2020e P/B, offering 48% upside.
Huaneng-H is trading at 7.1x 2020e P/E and 0.6x 2020e P/B. Maintain OUTPERFORM rating and TP of HK$6.00, implying 10.7x 2020e P/E and 0.9x 2020e P/B, offering 51% upside.
Risks
Coal price volatility; disappointing electricity demand.