Suntien had determined A-share listing price at RMB3.18 per share, reflecting 8.65x/1.0x 2019 PER/PBR, in line with our expectation. Based on A-share listing record, we believe Suntien’s A-share listing PER would be the lowest since 2019. With reference to several H+A companies’ listing history, we expect Flat Glass (6865 HK/601865 CH, NR) would be a close comparable to Suntien. We expect A-share listing will boost Suntien’s H-share performance in short term, and Suntien’s inclusion of southbound connect will be likely the next catalyst to trigger H-share re-rating. We raise Suntien’s gas segment valuation from 10x to 12x, and our SOTP valuation for Suntien is therefore lifted by 23.5% to HK$2.84. Maintain BUY.
- A-share ticker 600956 CH. Suntien announced to start A-share offering from 12 Jun, with a price at RMB3.18, indicating 8.65x/1.0x PER/PBR. Share offering scale is 134.75mn shares, raising RMB428.51mn equities. After fee, the Company expects to raise RMB389.83mn from the offering. With reference to A-share IPO history since 2019, days between listing and hearing range from 11 to 49 days with an average of ~25 days. We expect Suntien’s A-share will likely come on stream in early Jul.
- Southbound stock-connect inclusion will be next catalyst. Suntien’s A-share listing progress had boosted market sentiment on the Company. Share price rebounded 54% from a year low of HK$1.26 on 24 Mar. According to recent practice of H+A companies, we expect Suntien’s H-share to be included into southbound stock-connect 10 trading days after A-share listing. Given Suntien’s attractive fundamentals in wind and gas businesses, solid earnings performance with generous dividend distribution track record, and limited A-share offering size, we think the Company will draw a lot of attention through southbound investment. We see stock-connect inclusion a strong catalyst for H-share value re-rating, and a close example would be Flat Glass (6865 HK/601865 CH, see performance detail in page 2).
- Maintain conviction BUY; raise TP by 23.5% to HK$2.84. We trim our FY20-22E EPS forecast by 3.3%/6.6%/6.1% to RMB0.38/0.39/0.44 to reflect 1) COVID-19’s impact, 2) more conservative assumption on associates profit contribution, and 3) 3.5% earnings dilution from the offering. After A-share listing, we think Suntien’s gas business value will gain more market recognition. Therefore, we raise P/E multiples from 10x to 12x for gas business to reflect optimistic market outlook. Our SOTP TP is raised by 23.5% from HK$2.30 to HK$2.84. We maintain BUY rating with high conviction.
