Yangtze Power (600900): 3Q19 performance continued to maintain stable investment income smoothing the impact of weaker water
It is predicted that the profit in the third quarter of 19 is basically flat. We expect that Yangtze Power ‘s weak water supply in the third quarter of 19 will bring down the income end by 10%.2) At least increase the investment income of SDIC and Sichuan Investment equity method, and 3) The loose monetary environment overlaps with reduced interest-bearing debt and reduces financial costs. Key points of attention In the third quarter, the price of electricity may remain stable, and the weakening of the water supply will cause the income side to weaken for a period of time.In the end, the electricity price negotiation of the company’s generating units is still underway. Except for Gezhouba (the electricity price model was last year), there are currently no other announcements about the purchase and sale of electricity contracts.Therefore, we expect that the electricity price level in the third quarter may remain stable.In terms of electricity, the water from the Three Gorges and Xiluodu came dry last year.0% and 29.In the case of 5%, the company controlled the power generation in the third quarter beyond the predetermined range to 9.At 6%, we expect the revenue side to weaken by the same amount. Increased investment income and decreased financial expenses helped smooth 3Q19 performance.Despite the pressure from the water supply variables and the income side, we believe that the company’s third-quarter performance is still expected to maintain stability. Favorable factors include: 1) SDIC, Sichuan Investment will continue to bring a net increase in equity investment income during the flood season.In the third quarter of our budget, Sichuan Investment may contribute 3 in total.700 million (an increase of 200 million from the previous month, no related contribution 四川耍耍网 last year), so the long-term single-year joint venture joint venture investment income is expected to reach 1 billion.2) The loose monetary environment overlaps. At the end of the second quarter, the company’s interest-bearing debt will decrease by 17% each year. We expect the company’s financial expenses to decrease by 14% in the third quarter. Estimates and recommendations Based on conventional and more optimistic investment income forecasts, we raised our company’s 2019/20 profit forecast by 3% / 2% to US $ 228 / 23.4 billion.The company’s current consensus corresponds to 2019/203.6% / 3.6% dividend yield, 17.2/16.9 times price-earnings ratio and 2.6/2.5x P / B. We are optimistic about the company’s strategic development of “one main, two wings” in hydropower, internationalization, and transportation. We maintain the company ‘s outperforming industry rating and target price.80 yuan, corresponding to 2019/20 3.3% / 3.3% dividend yield, 19.1/18.6 times price-earnings ratio and 2.9/2.7 times P / B, compared with 10 previously included.6% upside. Risks came in less than expected; financing costs fell less than expected.