Suntien realized net profit of RMB1,433mn, up 6.6% YoY, slightly higher than our estimates. The Company maintained generous dividend payout of 35.9% with a final dividend of RMB0.136 per share. Looking ahead in 2021E, mgmt. guided wind segment to maintain robust power generation growth (c.30% YoY) on the back of capacity addition, while gas sales volume to increase 5-8% with gas dollar margin to remain sluggish. Our revised outlook suggests Suntien’s earnings growth to accelerate to 22.6% in 2021E. We lift our SOTP TP slightly to HK$3.43. Maintain BUY.
- FY20 results in line. Revenue increased 4.8% YoY to RMB12.5bn, with renewables power revenue grew by 13.9% while natural gas sales remained flat on lower gas ASP. Major expenses were in line with our estimates, and finance costs increased 4.3% YoY only while total borrowing amount expanded 29.6% YoY. Effective tax rate also exhibited slight decline on higher profit contribution from wind segment. Net profit was RMB1,433mn, up 6.6% YoY.
- Wind power will be key driver in 2021E. Suntien added 1,056MW new wind capacity in 2020 to secure high tariff project, significantly higher than mgmt. guidance back in 3Q20 results briefing. Wind power tariff increased slightly from per kWh RMB0.46 to RMB0.47 on new project contribution from high tariff areas such as Jiangsu and Guangxi. For 2021E, mgmt. guided target power generation volume of 13TWh with 2,400 wind utilization hours, reflecting 32% power generation growth YoY. We think wind power will be a key earnings growth driver in 2021E.
- Gas sales volume to increase 5-8% in 2021E. Suntien recorded gas sales volume of 3.5bcm, up 8.9% YoY. Competition with LNG was fierce in 2020, which led to a shrink in gas dollar margin to RMB0.266 per cbm. Mgmt. expects gas sales volume to increase 5-8% in 2021E, while gas dollar margin may remain sluggish as economy in Hebei is in early phase of recovery. For LNG terminal, construction is on track to schedule, and Suntien expects phase 1 project to commence operation in 2023.
- A-share placement a priority in 2021E. Suntien re-initiated A-share placement motion. EGM is going to be held on 23 Apr, and mgmt. plans to submit application material by end-Apr once the proposal is approved. Based on recent placement reference, CSRC needs 3-4 months on average to process before granting approval. Given Suntien’s CAPEX needs (RMB11bn in 2021E) and increasing gearing, mgmt. thought A-share placement a priority in the year. As A-share price is significantly higher than Suntien’s book value, we expect share placement number and EPS dilution will likely be limited, and lower than highest potential dilution of 23.6%.
- Maintain BUY with TP lifted slightly to HK$3.43. We revise our FY21/22E earnings outlook slightly by +1.4%/-0.4% respectively on slower-than-expected gas dollar margin recovery outlook but compensated by higher wind power generation. For wind power generation, we adopt more conservative assumption with 21.8% power generation growth. We think Suntien is still on track to accelerating earnings growth to 22.6% in FY21E. And our SOTP TP is lifted slightly from HK$3.26 to HK$3.43, reflecting 6.24x forward P/E and 0.76x forward P/B. In Jan-Feb 2021, Suntien recorded wind power generation growth of 73.3% YoY. We think the Company’s 1Q21 results would be a short term catalyst. Maintain BUY rating.
