CHINA POWER 2380 11/6/2007 Action Buy Target Price $5.500 Reason
China Power Int’l (2380, $4.00) 6M Target $5.50 Trading BUY
* China Power Int’l (CPI) acquired 25% stake in Shanghai Electronic Power in 2006. This associated company will expand its installed capacity by 12% and 25% in 2007 and 2008 respectively. The A-share price of Shanghai Electronic Power rose about 90% after being bought by CPI. * 3 greenfield projects (Pingwei II, Yaomeng II, Huanggang) will come on stream in 2007 & 2008 with higher profit margins. * CPI will continue to acquire power assets from its parent company (probably with capacity of 40GW) and other quality projects (for example, Qinghe plant in Liaoning). * If the asset injection above-mentioned materialises, we forecast CPI’s EPS will grow more than 45% per annum in 2007 and 2008. * Our target price of $5.50 is based on 2008 PE of 12x.
|