CGN Power announced 2020 gross power generation of 198.4TWh （+4.3% YoY） and on-grid power generation of 186.5TWh （+4.2% YoY）， which is in line with our expectation. We maintain our EPS forecasts of Rmb0.21 in 20E （+2.6% YoY）， of Rmb0.22 in 21E （+8.4% YoY）， and of Rmb0.25 in 22E （+10.4% YoY）。 Given the favourable policy environment of the nuclear power industry, we raise our target price from HK$1.85 to HK$2.10 and maintain outperform rating.
　　Steady power generation. As of 2020, the company managed 24 nuclear power units under operation, with a total installed capacity of 27.1GW. 7 nuclear power units are under construction and will be gradually commenced to operation since 2H21. Total on-grid power generation amounted to 186.5TWh （+4.2% YoY）， mainly attributable to Yangjiang Unit 6 and Taishan Unit 2 commenced into operations in 2019. Average utilization hours achieved 7,309 hours, decreasing by 198 hours YoY, mainly due to the units shutdowns in 1Q20 caused by COVID-19. We believe the company will achieve a moderately positive growth in power generation if all units could operate at full load.
　　Marketization percentage increased slightly as well as tariff. In 2020, marketization percentage of total power generation accounted for 33.52% （vs 32.88% in 2019）， and the average tariff （tax exclusive） achieved Rmb0.3147/kWh （vs Rmb0.3130/kWh in 2019）。 According to management, the company has been negotiating with local governments regarding the marketization power generation, and both the percentage and the tariff will slightly increase in 2021. The company also note that it will remain 20% of its total power generation in Guangdong to trade at better tariff with priority in 2021. Furthermore, Yangjiang Unit 2 and Lingao Unit 2 will participate in the annual collateral negotiation with additional 2TWh power generation plan. The company is confident on market-based bidding given its price and cost advantage over thermal power companies.
　　Favourable policies. The carbon neutral target by 2060 proposed by China has pictured a blue print for the nuclear industry. Nuclear power is clean, stable and economical. We believe its installations would benefit from China’s energy transformation in the long term. In September 2020, the Executive Meeting of the State Council approved 4 new units, indicating a higher possibility of government approval of new power units construction. According to management, there may be 6 to 8 new units to be approved each year during 2021 to 2025 based on the nuclear development plan. As the absolute industry leader, we believe the company would benefit from such policy favors with its advanced technology and operating efficiencies.
　　Maintain outperform. We maintain our EPS forecasts of Rmb0.21 in 20E （+2.6% YoY）， of Rmb0.22 in 21E （+8.4% YoY）， and of Rmb0.25 in 22E （+10.4% YoY）。 Given the favourable policy environment of the nuclear power, we raise our target price from HK$1.85 to HK$2.10 and maintain outperform rating.