Guodian Power (600795): 1H19 performance was slightly lower than expected cost increase, dragged down by impairment losses
1H19 results were slightly lower than expected Guodian Power announced 1H19 results: revenue 554.
9 trillion, ten years +7.
7% (the impact of the joint venture has been restated); net profit attributable to the mother22.
600 million, ten years +12.
4%, slightly lower than our expectations, mainly due to the increase in management expenses, financial expenses exceeded expectations and impairment losses.
The development trend costs increased, and the impairment loss brought 1H19 performance beyond expectations.
In the first half of 2019, the company’s net profit attributable to mothers increased by 12% to US $ 2.3 billion per year (the impact of the joint venture has been reiterated). The improvement in profit mainly comes from the continuous decline in fuel costs.
However, the profit improvement was lower than our expectation, mainly due to (1) the increase in maintenance costs, the consolidation of energy assets of Guodian Construction Investment Inner Mongolia led to an increase in management expenses + 10%, and the management expenses accounted for 2 of the 杭州桑拿网 revenue.
8%, higher than 1.
2%; (2) ten years of financial expenses + 7%; (3) impairment loss on bad debts1.
The profitability of the joint venture is lower than the company’s comprehensive level and weaker than expected.
Beijing Guodian, a joint venture established by the company and Shenhua, recorded revenue of 425 trillion yuan in the first half of the year, and net profit (including minority shareholders’ profit and loss) of 21 trillion yuan, implying 5.
0% net profit margin.
At the same time, based on the net assets of the joint venture company, its ROE is about 2.
8% (annualized), lower than the overall 4 in the first half of Guodian Power.
The 2% ROE level was slightly lower than expected.
Earnings forecasts and estimates take into account that the company’s performance in the first half of the year is less than expected, as well as a more conservative forecast of thermal power generation in the second half of the year, we cut the company for 2019/20.
Currently corresponds to December 2019/2020.
4 times / 10.
9 times price-earnings ratio.
We temporarily maintain the company’s Outperform rating.
In view of the lowered earnings forecast, we lower our target price by 6.
6% to 2.
85 yuan, corresponding to 14.
3x 2019 P / E ratio and 12.
6 times 2020 price-earnings ratio, compared with the previous inclusion of 15.
Risky coal prices were higher than expected, and power demand was lower than expected.