Intrinsic Value China Longyuan Power Group Corporation Limited (0916.HK)

• Previous Close: HK$7.10
• Intrinsic Value: HK$4.81
• Upside potential: -32%

Stock Valuation Context

Business Model And Market Position

China Longyuan Power Group Corporation Limited operates as China's largest wind power producer, generating and selling electricity primarily from wind and coal sources. The company's core revenue model involves designing, developing, constructing, and operating power plants while selling electricity to external grid companies. Its diversified portfolio includes thermal, solar, tidal, biomass, and geothermal projects alongside equipment manufacturing and maintenance services. As a subsidiary of China Energy Investment Corporation, Longyuan Power benefits from state-backed infrastructure development and China's aggressive renewable energy transition. The company maintains a dominant market position in wind power generation, leveraging its extensive operational experience since 1993 to capitalize on national clean energy policies. Its integrated approach encompassing project development, equipment sales, and consulting services creates multiple revenue streams while supporting China's carbon neutrality goals through substantial renewable capacity expansion.

Revenue Profitability And Efficiency

The company reported revenue of HKD 37.07 billion with net income of HKD 6.35 billion, demonstrating solid profitability in the renewable utilities sector. Operating cash flow of HKD 17.06 billion indicates healthy cash generation from core operations, though significant capital expenditures of HKD 26.86 billion reflect ongoing investment in capacity expansion. The diluted EPS of HKD 0.76 shows efficient earnings distribution across its substantial share base.

Earnings Power And Capital Efficiency

Longyuan Power demonstrates strong earnings power with substantial operating cash flow generation supporting its expansion strategy. The negative free cash flow position, resulting from aggressive capital investment in renewable projects, reflects strategic prioritization of growth over immediate cash returns. The company's capital efficiency is geared toward long-term asset development in alignment with national energy transition objectives.

Balance Sheet And Financial Health

The balance sheet shows total debt of HKD 125.44 billion against cash and equivalents of HKD 3.28 billion, indicating significant leverage typical of capital-intensive utilities. The debt load supports substantial infrastructure investments, while the company's state-owned enterprise status provides implicit support for its financing needs. The structure aligns with long-term asset development in the energy sector.

Growth Trends And Dividend Policy

The company maintains a dividend per share of HKD 0.249, providing income to shareholders while pursuing aggressive capacity expansion. Growth trends are driven by China's renewable energy transition, with capital expenditures significantly exceeding operating cash flow indicating substantial investment in future capacity. The balance between dividend distributions and reinvestment reflects the company's dual objectives of shareholder returns and market expansion.

Valuation And Market Expectations

With a market capitalization of approximately HKD 116.1 billion and a beta of 0.59, the market prices Longyuan Power as a relatively stable utility with growth potential. The valuation reflects expectations for continued expansion in renewable energy capacity and supportive government policies driving long-term earnings growth in China's energy transition.

Strategic Advantages And Outlook

The company's strategic advantages include market leadership in wind power, state-owned enterprise status ensuring policy support, and diversified renewable portfolio. The outlook remains positive given China's commitment to carbon neutrality by 2060, driving sustained demand for renewable energy investments and potential capacity growth through continued government-backed expansion initiatives.

Sources

Company financial statementsHong Kong Stock Exchange filingsCorporate website information