Morgan Stanley raised its target price for CGN Power (01816) to HK$2.52 from HK$1.8 and upgraded its rating to "overweight" from "underweight".
The research house expects CGN Power to generate earnings growth of 5.8% in 2019 and 9.4% in 2020. Morgan cited a rebound in utilization hours and commissioning of Yangjiang #6, Taishan #1, and Taishan #2. It expects China to accelerate the approval of more nuclear units in 2020 as Hualong One design is commissioned.
With its A-share issuance completed in August 2019, CGN Power's gearing is expected to decline from 289% in 2018 to 196% in 2019. Morgan expects CGN Power to generate dividend per share (DPS) growth of 7% in 2019, 4% in 2020, and 6% in 2021 (following 41% overall DPS increase in 2016-2018), thanks to strong OCF and limited capex.
It added that CGN Power's OCF (operating cash flow) of Rmb28bn and FCF (free cash flow) of Rmb12bn in 2019 ranked top among all Chinese power utilities.
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