21 Mar 2019

Crosby Research: Huaneng Renewables (958 HK): Accelerating capacity growth in FY19 and FY20

Huaneng reported its FY18 results with topline grew by 10.4% YoY to Rmb11.7bn, mainly due to 1) 11.2%/13.5% YoY growth in wind/solar power generation; and 2) average on-grid tariff declined 1.2% YoY to Rmb0.563/kWh. Operating expenses increased by 14.3% YoY to Rmb6.1bn due to the increase of installed operating capacity, resulting in a surge of D&A expenses of 4.6% YoY and increase in staff cost of 21.4% YoY. In particular, repairs and maintenance costs rose 53.3% YoY to Rmb1.24bn as 1) Rmb419m of impairment losses of project under construction (FY17: Rmb204m) were recognized during the period due to delayed construction and declining power demand growth in certain projects, and 2) operating and maintenance costs per KwH has increased from 1.4 cents to 1.8 cents in FY18 due to 1.15GW of wind capacity was out of warranty period. As result, FY18 reported NP was slightly up by 2.5% YoY to Rmb3,086m. After stripping out the one-off impairment items, recurring NP was up by 9.3% YoY to Rmb3,516m. The company declared a final DPS of Rmb0.044 (FY17: Rmb0.043).