Intrinsic Value China Yangtze Power Co., Ltd. (600900.SS)

• Previous Close: $26.36
• Intrinsic Value: $15.45
• Upside potential: -41%

Stock Valuation Context

Business Model And Market Position

China Yangtze Power operates as a premier hydropower generation company in China, owning and managing massive-scale facilities including the iconic Three Gorges Dam along with Gezhouba, Xiluodu, and Xiangjiaba stations. Its core revenue model is fundamentally driven by selling the electricity generated from its extensive 45,495 MW installed capacity portfolio to regional power grids under long-term contracts, ensuring highly predictable and stable cash flows. The company holds a dominant and strategically vital position within China's clean energy sector, functioning as a critical baseload power provider that supports national grid stability and the country's ambitious carbon neutrality goals. Its ownership of the world's largest power plant complex provides an unparalleled competitive moat through immense scale, operational expertise, and irreplicable geographic advantages, cementing its status as a low-cost leader and a cornerstone of China's utility infrastructure.

Revenue Profitability And Efficiency

The company demonstrates robust financial performance with revenue of CNY 82.5 billion and net income of CNY 32.5 billion, translating to a high net profit margin of approximately 39.4%. This exceptional profitability is driven by the low variable cost structure inherent to hydropower generation, where significant capital investment yields long-term operational efficiency. Strong cash generation is evidenced by operating cash flow of CNY 59.6 billion, significantly exceeding net income.

Earnings Power And Capital Efficiency

Diluted EPS of CNY 1.33 reflects the substantial earnings power derived from its massive asset base. The company generates formidable operating cash flow of CNY 59.6 billion, which comfortably funds capital expenditures of CNY 14.4 billion. This strong internal cash generation supports debt servicing, strategic investments, and a consistent return of capital to shareholders without straining its financial flexibility.

Balance Sheet And Financial Health

The balance sheet is characterized by a substantial debt load of CNY 250.6 billion, which is typical for capital-intensive utility infrastructure projects. This is offset by strong and predictable operating cash flows that provide solid coverage for debt obligations. A cash position of CNY 6.6 billion offers moderate liquidity, while the overall financial health is considered stable given the essential nature of its assets and regulated cash flows.

Growth Trends And Dividend Policy

As a mature utility, organic growth is primarily linked to capacity factors and tariff adjustments rather than rapid expansion. The company maintains a shareholder-friendly capital allocation policy, evidenced by a substantial dividend per share of CNY 0.943. This represents a high payout ratio, underscoring a commitment to returning cash to investors supported by its reliable earnings and cash flow profile.

Valuation And Market Expectations

With a massive market capitalization of approximately CNY 680.2 billion, the market values the company as a large-cap, low-beta (0.187) utility staple. This valuation reflects expectations for stable, defensive earnings, consistent dividends, and a role as a core clean energy holding, insulated from economic cycles due to the essential nature of electricity demand.

Strategic Advantages And Outlook

Key strategic advantages include ownership of irreplaceable hydropower assets, a low-cost operator status, and alignment with China's national energy and decarbonization policies. The outlook remains stable, supported by long-term power purchase agreements and the critical role of hydropower in providing reliable, renewable baseload generation for the foreseeable future, though subject to hydrological risks and regulatory frameworks.

Sources

Company Annual ReportExchange Filings