CLP Holdings:Above:2016net profit 5%over our forecast

Despite an in-line revenue, CLP’s net profit of HK$12.7bn (EPS: HK$5.03, -19% yoy)is 5% above our forecast. It has declared a full-year dividend of HK$2.80(+4% yoy),in line with our forecast.

The 91% yoy smaller one-off net gains (mostly affected by the HK$6.6bn gain onsale of Iona Gas Plant in Australia in 2015) contributed to the (expected) earningsdecline despite a 7% yoy growth in operating earnings. Regional earnings details asfollows:

Hong Kong: +4% yoy; steady growth from the region which contributed 72% ofgroup earnings.

Mainland China: -23% yoy; specifically, -54% yoy for its thermal power plants dueto higher coal prices, lower power tariff and power plant utilization.

Australia: +121% yoy; higher volumes and higher wholesale electricity prices, lowerfinance costs, mark‐to‐market gains on energy derivatives, and lower depreciation.

India: -24% yoy; several one‐off items in 2015and a contractual step down in tariffsfor Jhajjar in 2016.

Southeast Asia and Taiwan: -12% yoy; lower tariffs.

We maintain our Neutral rating and 12-month P/E-based target price of HK$70. Keyupside/downside risks to regulatory return (Scheme of Control), new projects, andforeign exchange.

The following provides further details on the numbers.