Owing to launch of new generating units, Q1-Q3 generating capacity of the company rose by 7.8% than the same period of 2007. However, slowdown in social electricity demand led obvious fall in generating hours of current units compared with the corresponding period in 2007.
Coal price surge induced the loss in Q3 2008. Because coal price change badly depends on different regions, profitability of wholly-owned subsidiary, holding and joint-stock companies differs greatly; wherein, pit mouth price of Shanxi jumped surprisingly; Datong mine-mouth power plant could hardly sustain such a coal price and suffered a heavy loss. Comparatively, affiliated Liaoning regional power plant, Ningxia regional power plant and Zhejiang Beilun power plant all saw earnings (total of Q1-Q3 2008).
Infrastructure project is in steady progress, still with hydropower cascade exploitation in Dadu River valley, and cooperation between coal and electric power enterprises of Mongolia Erdos as the core.
Supposing that average prices of standard coal in 2009-2010 fell by 2.5% and 5% respectively, 2009 on-grid price rose by 6% and 2010 remained the same, and 2009-2010 utilization ratio of thermal power dropped by 2% and 1% separately, thus 2009-2010E EPS was Rmb0.26 and Rmb0.33.
Given WACC=10.1% and sustainable growth rate=1%, reasonable value of the company is calculated to be Rmb5.7 by DCF. According to CAGR and PB-ROE estimation matrix of important companies in this sector, we hold that the company still has relative estimation advantage in this sector, thus maintain “Cautious” rating.