Citi raises the target price for CHINA POWER International to HKD 3.5, with first-half performance slightly exceeding expectations

Citi released a report indicating that China Power International (02380.HK) is expected to achieve a year-on-year net profit growth of 0.7% in the first half of 2025, reaching RMB 2.587 billion. The profit growth from wind and coal-fired power generation businesses is partially offset by a decline in profits from solar and hydropower businesses. The performance during this period slightly exceeded expectations, mainly due to a 14.4% year-on-year decrease in unit coal fuel costs to RMB 234.52 per megawatt-hour, which was better than expected, and a 10.6% year-on-year increase in hydropower grid electricity prices to RMB 278.42 per megawatt-hour.

The bank stated that based on the decline in coal costs, it has raised its net profit forecast for China Power in 2025 by 2%, with the target price adjusted up by 3% from RMB 3.4 to RMB 3.5. It maintains a "Buy" rating for several reasons: (i) abundant coal supply in the second half of 2025, with further downward potential for coal costs; (ii) increased rainfall in July and August driving a recovery in hydropower utilization rates; (iii) attractive valuations, with a forecasted price-to-earnings ratio of 8.7 times, a price-to-book ratio of 0.9 times, and a dividend yield of 5.7%