We think Suntien’s 2020E earnings performance would be somewhat lackluster due to impacts of COVID-19, but market had fully priced in. Looking ahead in 2021E, on the back of wind capacity addition and gas dollar margin to resume normal, we expect Suntien to resume earnings growth to 21.2%. The Company’s valuation is significantly below peers’. As time moves towards 2022 Beijing Winter Olympics (4 Feb 2022), we expect market to pay more attention to Suntien for its largest wind operator position in Hebei. We lift our SOTP TP by 30.4% to HK$3.26, and we expect re-rating for Suntien-H is coming. Maintain BUY.
- 2020E earnings to stay flat. Suntien recorded wind power generation/gas sales volume increase of 11.9%/8.9% YoY in 2020. Both segments’ performance was slightly below our estimates due to weaker-than-expected wind resources and COVID-19’s impacts. We expect Suntien to have 2020E earnings of RMB1,396mn, up 3.9% YoY only, and we believe market had fully priced in operating and earnings performance in 2020E.
- A good start in 2021E. We think Suntien had a good start in 2021E, with wind power generation surged 86.3% YoY in Jan, and gas sales volume also maintained steady growth of 7% YoY in the month. On the back of wind farm capacity addition, we estimate wind power generation to increase 15.6% YoY in 2021E, while gas sales volume to resume double digit growth to 11.4% with gas dollar margin to recover with normalized LNG price. We expect 2021E earnings to increase by 21.2% YoY to RMB1,692mn.
- A-share placement to attract market attention. Suntien announced A-share placement proposal in Dec 2020. The Company intended to raise up to RMB5.1bn through a maximum placement of 1.15bn new shares, bringing a potential dilution up to 23.1%. The potential pricing for the placement will be the higher of 20% discount to 20-day closing average or Suntien’s book value per share. With reference to Suntien-A’s recent share price movement, we expect share dilution impact will be significantly lower than 23.1%, and we also believe the placement will boost Suntien-A’s future trading liquidity and attract market attention for Suntien-H.
- Catalyst on renewables concept for Winter Olympic Games. Supported by China’s low-carbon development strategy, China wind operators had experienced significant valuation re-rating from 4Q20. Trading at only 4.8x/0.55x forward PER/PBR, Suntien is obviously lagging behind. As the largest wind operator in Hebei, Suntien is running more than 3.8GW wind capacity in the province and acting as one of the most important renewables energy suppliers to the 2022 Beijing Winter Olympic Games. As time moves towards 2022 Beijing Winter Olympics, we expect market sentiment will be boosted and will trigger a re-rating for Suntien-H.
