Expected performance. For 07, the company reported revenue of 20.49 billion yuan (+38.68% yoy) and operating profit of 1.8 billion yuan (-4.66% yoy). Assets held by parent generated 1.23 billion yuan (+1.16% yoy) of net profit with diluted EPS of 0.20 yuan and a before-tax dividend of 0.62 yuan cash for every 10 shares.
Operations of electricity business. For the period under review, power generation grew 40.46% yoy to 70.27 billion kWh thanks to installation of new generators. New capacity released within 07 reached 60.35 billion kWh, an increase of 29.37% yoy. Utilization hours averaged out to 4674, sliding 13.5% yoy which was far above a 5.3% yoy drop in the national hydro- and thermo-power. However, considering capacity expansion will slow down in Shandong, we expect utilization hours to rebound from rock bottom in 08E.
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Earnings forecast and rating. Notwithstanding unexpected coal price hikes at the beginning of 08 and unpromising coal-power price linkage, we are upbeat about the company’s long-term outlook considering coming acquisition of power assets and reasonable location of generators. We forecast 08-09E EPS to be 0.26 yuan and 0.33 yuan respectively and reiterate our OVERWEIGHT rating for the counter.