Investment positives
　　We resume coverage of CGN Power-H share with an OUTPERFORMrating and a target price of HK$2.32, implying 9.7x 2020e P/E and9.4x 2021e P/E. We initiate coverage of CGN Power-A share with anOUTPERFORM rating and a target price of Rmb3.84, implying 18.0x2020e P/E and 17.7x 2021x P/E..
　　Why an OUTPERFORM rating?
　　IRR high and fuel cost stable for nuclear-generated electricity; largeupside in domestic nuclear installation and market share of powergeneration from nuclear technology. The portion of nuclear in powergeneration in China remains markedly lower than the correspondingglobal averages (4.8% vs. 10%), which suggest large upside.
　　CGN Power is the largest nuclear power operator in China byinstalled capacity, and its senior managers mostly have more than 20years of experience in the nuclear power industryOperating efficiency ahead of peers; return rate steady. The firm’sabove-average utilization hours and lower-than-average costdemonstrate its operating efficiency, and we believe this will enhancethe return rate of its nuclear power projects.
　　How do we differ from the market We are upbeat on CGN Power’soperating efficiency and project management capabilityPotential catalysts: New project approval; interest rate cuts.
　　Financials and valuation
　　Our EPS forecast is Rmb0.21 for 2020 and 0.22 for 2021, a CAGR of4.0% over 2019–2021.
　　Our DCF target price for CGN Power-H is HK$2.32, implying 9.7x2020e P/E and 9.4x 2021e P/E, and 1.1x and 1.0x P/B, offering 35%upside. CGN Power-H is trading at HK$1.72 as of market close July 7Beijing time, implying 7.2x 2020e P/E and 7.0x 2021e P/E.
　　Our DCF target price for CGN Power-A is Rmb3.84, implying 18.0x2020e P/E and 17.7x 2021e P/E, and 2.0x and 1.9x P/B, offering 20%upside. CGN Power-A share is trading at RMB3.20 as of market closeJuly 7 Beijing time, implying 15.0x 2020e P/E and 14.7x 2021e P/E.
　　Risks
　　Power demand lower than expected; electricity tariff cut; nuclear fuelcost fluctuation; end of preferential policy on tax rate; risk of interestrate and currency exchange rate; delays in construction of new powerstations; safety issues beyond company’s control; licensing for newnuclear power company.