Lead the way as the renewable frontrunner

（以下内容从招银国际《Lead the way as the renewable frontrunner》研报附件原文摘录）
龙源电力(001289)
China Longyuan (CLY) reported revenue of RMB28.097bn for 1Q-3Q23,experiencing a 7.00% YoY decrease. However, its net profit saw a notableincrease of 18.95% YoY to RMB6.379bn thanks to a rapid rise in newly addedinstalled capacity of wind and solar power and lower operating costs.Additionally, CLY is actively focusing on “substitution of large for small" ofwind turbine its old wind turbines to enhance long-term results and is activelyengaged in green electricity and certificate trading. The coverage of ChinaLongyuan-A is transferred to us, and we assign a TP of RMB23.28 with aBUY rating.
1Q-3Q23 earnings beat. For 1Q-3Q23, CLY's revenue wasRMB28.097bn, down by 7.00% YoY. However, the attributable net profitincreased by 18.95% to RMB6.379bn. In particular, the wind powergeneration revenue saw a 3.53% increase, while the thermal powersegment revenue experienced a 34.17% YoY decline. Other renewablepower segment saw a solid increase of 68.48%YoY driven by robust solarpower growth. The net profit attributable to shareholders up by 14.1% YoYthanks to increased newly-added installed capacity and lower operatingcost.
Taking advantage of the “substitution of large for small" policy, CLYhas actively upgraded and expanded old wind turbines' installedcapacity, expecting significant long-term earnings improvement. Thepolicy allows for the retrofitting and upgrading of old wind turbines that haveoperated for over 15 years with installed capacity below 1.5 MW. CLY, withnearly 30 years of wind power project operation experience, owns asignificant number of old turbines, with 70% having a capacity below 1.5MW and 3,000 turbines below 1 MW. Seizing the policy opportunity, CLYaims to enhance its wind power generation efficiency and project scale.
On-grid tariffs of wind power and thermal power improved in 1Q-3Q23; CLY has actively engaged in green electricity and greencertificate trading. Both wind and thermal power tariffs rose in 1Q-2Q23,driven by higher tariffs and electricity demand in the southern region.Additionally, CLY has actively engaged in green electricity and greencertificate trading, generating an income of RMB400mn from approximately1bn kWh of trading. It has mature experience in green electricity and greencertificate trading, which we think will provide favorable prospects for futuregrowth.
Assign a TP of RMB23.28 for China Longyuan-A with a BUY rating.We estimate CLY's EPS for 2023/2024 to be RMB0.97/1.14, representingan increase of 58.6/17.8% YoY. We assign a TP of RMB23.28 for CLY-A,based on a target FY23E P/E ratio of 24.0x. Currently, CLY-A trades at21.5x FY23E P/E, and we believe the valuation is attractive, given the rapidgrowth of its newly-added installed capacity of wind and solar power, andsolid revenue growth potential from retrofitting old wind turbines. We havea BUY rating on the stock.