CLY’s FY20 net profit was RMB4,726mn, up 9.3% YoY, in line with our estimates. The Company intends to boost capacity installation pace in the coming five years with a total renewable capacity expansion pace of 30GW. In 2021E, CLY plans to install 3GW with a CAPEX budget of RMB25bn. In respect to subsidy receivables collection, the collection amount in FY20 beat guidance, but future collection outlook remains shady. We cut FY21/22E earnings outlook by 6.7%/8.5%, and trim TP to HK$12.98. Maintain BUY.
- FY20 results in line. Revenue grew 4.1% YoY to RMB28.7bn mainly on wind power generation growth. Depreciation and amortization was better than our expectation, while maintenance and other expenses exhibited significant growth in FY20, as increasing capacity out of warranty coverage boosted maintenance costs, and CLY recognized RMB942mn PPE provisions on coal power, biomass and some wind pipeline projects in Heilongjiang and Liaoning. Finance income read RMB374mn was a surprise from dividend income and FX gain. Net profit was RMB4,726mn, up 9.3% YoY, in line with our estimates.
- Wind power generation to increase 7.3% YoY in 2021E. CLY added 2,271MW wind capacity in 2020, of which 425MW was from offshore wind project. Mgmt. guided wind power generation of 46.9TWh, implying power generation growth of 7.3% YoY. We think the guidance is conservative since some capacity added had not commenced fully operation. Given CLY’s 2M21 power generation performance (+39% YoY with 20% run rate of guidance), we expect power generation to grow at a faster pace at 9.2% in 2021E.
- 14th FYP to add 30GW renewables capacity with focus on solar farm. CLY lifted renewables addition target from 20GW (in 3Q20 briefing) to 30GW in 14th FYP period. Solar capacity growth will outpace wind capacity for the first time with a distribution plan of 11GW/19GW for wind/solar respectively. For 2021E, CLY budgeted RMB25bn CAPEX (vs. RMB19bn in FY20) for 1.8GW wind farm and 1.2GW solar farm, and offshore wind will account for 600MW. Mgmt. reiterated IRR hurdle rate at 7%.
- Subsidy receivables rolled to RMB22.9bn. CLY collected RMB5.6bn subsidies in 2020, better than previous guidance. However, the remaining subsidies receivables still grew by RMB5.3bn to RMB22.9bn. Mgmt. expects to collect RMB4.26bn subsidies in 2021E on conservative basis. In respect to receivables financing as well as interest discount from green certificate, mgmt. is also waiting for further execution details. We expect subsidy receivables to grow further in 2021E.
- Cut TP to HK$12.98; maintain BUY. Based on operating and financial updates, we revised CLY’s FY21/22E earnings down by 6.7%/8.5% respectively. We turn cautious on accelerating subsidy receivables collection, given that recent government policies didn’t show hints for a total resolve for the subsidy shortfall. We take out receivables collection expectation from our previous DCF valuation. Our TP is cut from HK$15.0 to HK$12.53. We think short-term sentiment may turn weak on policy concerns, but CLY’s backdoor listing in A-share market will still be a catalyst in 2021E. Maintain BUY.
