Suntien suffered limited impacts from COVID-19 outbreak. Mgmt. disclosed wind and gas business were in normal operations, while new project construction may be subject to 1-2 month delay (especially Beijing – Handan auxiliary gas pipeline). In FY19, Suntien delivered satisfactory growth from wind power generation and gas sales with YoY volume increased by 15.1% and 23.0%, respectively. In FY20, we expect Suntien to experience gas sales growth to slow due to virus outbreak, and wind power to maintain decent increment with capacity addition. Suntien is still on track to its A-share listing, and we remain positive on the Company. Maintain BUY.
- FY19E earnings to increase mild. We estimate FY19 earnings to increase 8.7% to RMB1,347mn. Our earnings reflects 1) a previous gas receivable provision write back of RMB32.5mn; 2) additional receivable provision of RMB73.9mn from more conservative accounting treatment as Suntien announced in Dec 2019; and 3) effective tax rate to increase 5.6ppt to 15.2%. Our forecast is 9.0% lower than consensus est. of RMB1,480mn.
- A-Share hearing delayed, but still on track. The Company had obtained CSRC feedbacks, but official hearing was delayed due to epidemic outbreak. Mgmt. is preparing FY19 earnings data for submission. After FY19 results announcement, we expect Suntien will proceed for A-share hearing.
- FY20 outlook: earnings to remain resilient. We expect Suntien to maintain stable operation given its utility business properties. According to the Company, preliminary operating data in Jan – Feb reflected a slow start from wind segment, with power output declined 7.5% YoY in 2M20 due to slow wind speed, while 2M20 gas sales volume maintained YoY growth at 11.3%. For FY20, we expect 1) wind power output to increase 13.8% mainly driven by capacity addition and subject to no virus impact; and 2) gas sales will likely suffer a drag, leading to decline of sales volume growth to 9.6%, according to our estimate. We find earnings to remain resilient, despite trimming gas sales growth, as we believe new receivables provision will be significant lower, and Suntien will likely to receive ~RMB60mn provision write back to attributable shareholder’s profit.
- FY19E dividend yield at 9.1%. Based on our conservative estimates to consensus earnings, we still project a high dividend FY19E yield at 9.1% at 40% payout ratio. Trading at only 4.1x/0.47x FY20E PER/PBR, respectively, we believe Suntien is undervalued, and A-share listing will be a trigger for re-ratting. Maintain BUY.
