China is unlocking trillions in investment on renewables over the next decade to tackle the global climate change issue. Based on the target of no less than 1,200 GW of wind and solar cumulative installations in 2030announced by President Xi Jinping in the Climate Ambition Summit 2020, this implies no less than 710 GW of new wind and solar capacity between 2021and 2030(or equivalent to no less than 71 GW of newly installed capacity per year). The 710 GW also implies a total investment on renewables of approximately RMB4 trillion over the next 10 years (assuming 300 GW in wind and 410 in solar). We believe the 710 GW is only a conservative target.
Power sector investment is expected to gradually increase from 2021 to2025 following hitting a new high in 2020. Our best case scenario forecast suggests that total investment on the domestic power sector in 2020 may exceed the RMB 1 trillion milestone for the first time, challenging the RMB884billion recorded back in 2016. Looking into the next five years, we expect domestic power sector investment to fall within RMB1.5 trilion and RMB1.8trllion each year during the period from 2021 to 2025, with the majority to be spent on power grids and renewables.
We maintain the"Accumulate"investment rating and the TP of HK$1.00.
We are optimistic about the outlook of the Company despite the inevitable earnings decline in 2020. The A-share listing would be a key catalyst to the share price in the short term. Our revised EPS estimates from 2020 to 2022are RMB0.136/RMB0.184/RMB0.205, respectively. The TP corresponds to6.2x/4.6x/4.1×2020-2022 PER or 0.5x/0.4x/0.4x2020-2022 PBR.