Huaneng's power generation in China jumped 14% to 81.2b kWh

Its previous acquisition spree is paying off.

According to Jefferies Research, Huaneng reported strong 3Q15 earnings on the back of acquisition driven power generation growth and margin expansion as a result of lower coal cost.

3Q earnings now account for >90% of FY15 consensus estimate, and we believe consensus needs to be revised up by >15%. "We expect all IPPs to see further margin expansion in 2016. The Top picks among IPPs are Huaneng and Huadian," Jefferies said.

Here's more from Jefferies:

Huaneng Power Int’l reported PRC GAAP 3Q15 NPAT of Rmb4.18bn, +4% QoQ, and +11% YoY after restatement. Without adjusting for the acquisition, 3Q15 earnings would have implied a strong growth of 27% yoy.

The strong earnings growth is due to: (1) 14% growth in power generation: The company’s power generation within China increased by 14% YoY to 81.2bn kWh in 3Q15, mainly attributable to the ~8GW new capacity acquired last year as well as new operated generating units this year; (2) weakness in coal prices: Operating cost declined substantially by 9.7% YoY, leading to ~300bps expansion in operating margin (3Q15 operating margin was 20.9% vs. 17.7% in 3Q14).

9M15 NPAT of Rmb13.23bn accounted for 92% of our and consensus 2015 estimates. Assuming 4Q15 NPAT stays flat QoQ and there are no major impairment charges in the last quarter, the 2015 consensus will need to revise up by at least 15%. We revise up our 2015/16 earnings by 13%/11% mainly due to a 3% increase in volume assumption and 3% lower assumption in unit fuel cost

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