Investor Notes - Phillip Securities (HK) Ltd

24 Sep, 2024 (Tuesday)

CHINA RES POWER(836)
Analysis：
The National Energy Administration released the national electricity industry statistics for the period from January to August today. As of the end of August, the cumulative installed capacity of power generation nationwide is approximately 3.13 billion kilowatts, a year-on-year increase of 14.0%. Among them, the installed capacity of solar power generation is about 750 million kilowatts, a year-on-year increase of 48.8%; the installed capacity of wind power is about 470 million kilowatts, a year-on-year increase of 19.9%. From January to August, the investment in major power generation projects of national power enterprises reached 497.6 billion yuan, a year-on-year increase of 5.1%. The investment in grid projects reached 333 billion yuan, a year-on-year increase of 23.1%. In the first half of 2024, the performance of grid enterprises generally showed a steady growth trend, and with the delivery entering the peak season in the second half of the year, the performance flexibility is expected to further improve; accompanied by multiple demands such as the development of new energy, increase in electricity consumption, and renovation of old grid, the investment cycle of grid is long, and there is great room for improvement in the overseas penetration rate of Chinese enterprises. In the first half of 2024, the company's revenue remained flat year-on-year at 51.12 billion Hong Kong dollars, operating profit increased by 26.4% year-on-year to 13.27 billion Hong Kong dollars, and net profit increased by 38.9% year-on-year to 9.36 billion Hong Kong dollars. EPS increased by 39.3% year-on-year to 1.95 Hong Kong dollars. The rapid growth in the company's performance is mainly due to the decrease in the benchmark coal price of coal-fired power plants by -10.6%, leading to a substantial increase in profits in the thermal power business; the one-time gain of 876 million Hong Kong dollars from the acquisition of the Guangxi Hezhou thermal power project by the company. The company declared an interim dividend of 0.455 Hong Kong dollars per share, with an interim dividend payout ratio of 23.3% and an interim dividend yield of 2.44%.
Strategy：
Buy-in Price: $19.84, Target Price: $21.83, Cut Loss Price: $17.95

Report Review of August 2024

Sectors:

TMT, Semiconductors, Consumer & Healthcare （Eric Li）

This month I released reports of 361 DEGREES INT. (1361.HK).

During 2023FY, 361 Degrees International Limited (361 Degrees) recorded a revenue of RMB8,423.3mn, increasing 21.0% YoY. Profit attributable to the equity shareholders of the Company was RMB961mn, representing a YoY increase of 28.7%. A total dividend of HK20.4 cents per ordinary share (equivalent to RMB18.7 cents), representing a dividend payout ratio of 40.2%.

In terms of product segment, sales of the company's two core product lines, namely footwear and apparel, increased by 23.0% YoY and 9.8% YoY respectively. For the year under review, the proportions of total revenue of footwear and apparel sales were slightly increased from 41.0% to 41.7% YoY and slightly decreased from 35.2% to 31.9% YoY of the total revenue respectively. This was mainly due to the increase in proportion of sales revenue from 361 Degrees Kids from 20.7% to 23.2% of the total revenue for the year under review, which in turn affected the proportion of sales of various products to total revenue. The average wholesale price (AWP) of footwear and apparel edged up by 3.0% and 0.5% year-on-year respectively. The increase in footwear's and apparel's AWP was mainly due to the upward adjustments of the wholesale prices of the existing products across different product lines in order to cover the increase in cost of production and reflect the continuous brand image enhancement; the upgrade of product mix by launching a variety of new products with a higher AWP; and the increase in proportion of sales revenue generated from the e-commerce business which has a higher AWP than the sales made to distributors, above reasons contributed to increase in AWP as compared to that of last year. In addition, the sales volume of footwear and apparel products increased by 19.4% and 9.4% YoY, respectively.

In recent years, as China's consumer preferences leaned towards specialisation, diversification, and cost effectiveness, the company positions as a "professional, youthful, and internationalised" brand. The company has built a diversified brand matrix based on professional functions and its own-branded IP. With 2024 bringing numerous international and domestic sports events, including the highly anticipated Paris Olympics, which are expected to stimulate a broader participation in sports and increase consumer demand. We expect 2024-2025 EPS to be RMB0.49 and RMB0.53 respectively, with PT of HKD4.02, implies a FY2024E P/E of 7.47x (~2-yrs historical average). Our investment rating is “Accumulate”.

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