Intrinsic Value CGN Power Co., Ltd. (1816.HK)

• Previous Close: HK$3.26
• Intrinsic Value: HK$1.55
• Upside potential: -52%

Stock Valuation Context

Business Model And Market Position

CGN Power Co., Ltd. is a leading nuclear power generator in China, operating within the regulated utilities sector. Its core revenue model is based on the long-term sale of electricity generated from its nuclear fleet to state-owned grid companies under government-approved tariffs. The company operates 25 nuclear power units with a total installed capacity of 28,261 megawatts, representing a significant portion of China's clean energy infrastructure. As a subsidiary of the state-owned China General Nuclear Power Corporation, it benefits from strategic government support and policy alignment with national energy security and decarbonization goals. Its market position is characterized by operational scale, technological expertise in nuclear generation, and a critical role in providing baseload power. The company's involvement in construction activities further supports its expansion and modernization efforts within the highly specialized nuclear industry.

Revenue Profitability And Efficiency

The company reported robust revenue of HKD 86.8 billion, demonstrating stable cash generation from its long-term power purchase agreements. Net income reached HKD 10.8 billion, reflecting efficient cost management within its regulated operational framework. Strong operating cash flow of HKD 38.0 billion significantly exceeds capital expenditures, indicating healthy cash conversion from its core business activities.

Earnings Power And Capital Efficiency

With diluted EPS of HKD 0.21, the company maintains consistent earnings power supported by predictable nuclear operations. The substantial operating cash flow coverage of capital investments highlights effective capital deployment in maintaining and expanding its generation assets while generating sustainable returns.

Balance Sheet And Financial Health

The balance sheet shows significant total debt of HKD 199.3 billion, characteristic of capital-intensive nuclear power development. However, cash reserves of HKD 16.5 billion provide liquidity, and the company's regulated revenue streams support debt servicing capabilities within the stable utility sector framework.

Growth Trends And Dividend Policy

The company maintains a shareholder-friendly approach with a dividend per share of HKD 0.10322, supported by stable cash flows. Growth is primarily driven by capacity expansions and operational efficiency improvements within China's ongoing nuclear power development strategy, rather than rapid top-line expansion.

Valuation And Market Expectations

With a market capitalization of approximately HKD 183.7 billion, the market appears to value the company as a stable utility with predictable cash flows. The low beta of 0.144 reflects investor perception of defensive characteristics and limited sensitivity to broader market movements.

Strategic Advantages And Outlook

The company's strategic advantages include scale, government backing, and expertise in nuclear technology. The outlook remains stable, aligned with China's long-term energy transition goals and the continued importance of nuclear power in the national energy mix, though subject to regulatory developments and operational risk management.

Sources

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