Citibank expects power outages to decrease in the second half of the year, leading to an increase in power generation, and believes that the impact in the second half of the year will not be significant.
According to the intelligence of the Finance APP, Citibank released a research report stating that it has reiterated a "buy" rating for CGN Power (01816) with a target price of HKD 3.6. The company's online power generation in the first half of this year only increased by 0.1% year-on-year, lower than expected, mainly due to more power outages during the period than the same period last year. Considering that its high-profit power plants have greatly reduced their power generation, it is currently predicted that the mid-term net income may decline by about 5% year-on-year.
However, Citibank expects that power outages will decrease in the second half of the year, leading to an increase in power generation, and believes that the impact in the second half of the year will not be significant. Based on the defensive nature of CGN Power and its profitability that has not been affected too much by the relatively weak Chinese economy, the government also encourages the use of nuclear power. Citibank also reminded that factors affecting profits in the first half of the year also include value-added tax refunds in other income, which are difficult to predict as they are based on receipts.