HSBC Global Research lowered its target price for China Resources Power (CRP)(00836) to HK$11.5 from HK$12.4 and maintained its "hold" rating.
The research house said CRP's total power generation declined 4% in 3Q, from -5% in 1H. Thermal output improved from -7% in 1H to -6% in 3Q and -2% in September. For wind farms, output remained on a good trend (+14% in 3Q).
HSBC said CRP's share price has fallen in recent weeks as investors factor in lower tariffs for IPPs next year. CRP now trades at its lowest valuation for five years (0.6x 2019 PB) with a 7% dividend yield. HSBC sees a limited downside from current level as CRP should be the least affected listed IPP given its exposure to wind power.
Conversely, HSBC thinks the company is less likely to rerate over the near term, as detailed guidance from the NDRC and provincial governments on the new tariff system in 4Q could be a share price overhang.
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