Intrinsic Value China Datang Corporation Renewable Power Co., Limited (1798.HK)

• Previous Close: HK$2.09
• Intrinsic Value: HK$1.91
• Upside potential: -9%

Stock Valuation Context

Business Model And Market Position

China Datang Corporation Renewable Power Co., Limited operates as a significant renewable energy generator in China, focusing primarily on wind and solar power. Its core revenue model is built on developing, constructing, and operating renewable power plants to sell electricity, supported by a diversified portfolio that includes hydro and biomass energy. The company is a key subsidiary of the state-owned China Datang Corporation, positioning it within the nation's strategic push for energy security and decarbonization. Beyond generation, it engages in equipment R&D, maintenance services, and international project consultancy, creating additional revenue streams. This integrated approach, combined with substantial state backing, provides a strong foundation in the competitive but policy-driven Chinese utility sector. Its extensive installed capacity solidifies its role as a major contributor to China's renewable energy targets.

Revenue Profitability And Efficiency

The company reported robust revenue of HKD 12.6 billion for the period, demonstrating strong top-line performance from its power generation assets. Net income reached HKD 2.38 billion, translating to a healthy net profit margin. Operating cash flow was a substantial HKD 6.29 billion, indicating efficient conversion of earnings into cash, though significant capital expenditures highlight the capital-intensive nature of expanding renewable capacity.

Earnings Power And Capital Efficiency

The company exhibits solid earnings power with a diluted EPS of HKD 0.26. The substantial operating cash flow of HKD 6.29 billion is a key strength, providing internal funding for operations. However, the high capital expenditure of HKD 13.68 billion reflects the intense reinvestment required for growth, indicating a focus on expanding its asset base and future earnings potential.

Balance Sheet And Financial Health

The balance sheet is characterized by a high level of total debt at HKD 68.4 billion, which is typical for capital-intensive utilities funding large-scale projects. Cash and equivalents stood at a modest HKD 1.94 billion. The significant debt load is a key consideration for financial risk, though it is likely supported by long-term, stable cash flows from power purchase agreements.

Growth Trends And Dividend Policy

Growth is driven by the strategic expansion of renewable installed capacity, aligning with national energy goals. The company has demonstrated a commitment to shareholder returns, distributing a dividend of HKD 0.099 per share. This balanced approach of reinvesting for capacity growth while providing a dividend reflects a mature utility growth model.

Valuation And Market Expectations

With a market capitalization of approximately HKD 18.0 billion, the market valuation reflects the company's scale and strategic position. A beta of 0.258 suggests the stock is perceived as less volatile than the broader market, which is consistent with its utility status and stable, regulated revenue streams, indicating investor expectations of lower risk.

Strategic Advantages And Outlook

The company's primary strategic advantage is its position as a key player in China's state-directed renewable energy expansion, benefiting from policy support and its parent company's backing. The outlook is tied to the continued national commitment to decarbonization and energy security, providing a long-term growth runway, though subject to regulatory changes and project execution risks.

Sources

Company Annual ReportHong Kong Stock Exchange Filings