Longyuan's wind power capacity inched up by 0.94GW in 2Q15

2.0GW guidance seems on track.

Longyuan's reported EPS at RMB0.15 for 2Q15 was broadly in line with Barclays' estimate with a rise of 14% q/q and with operating profit flat q/q.

According to a research note from Barclays, the key highlights of the results were the acceleration in capacity additions and stronger cash flows in the quarter.

Installed capacity of wind power increased by 0.94GW in the quarter with the full-year guidance for an increase of more than 2.0GW appearing on track.

Operating cash flow at RMB8.6bn was 45% ahead of Barclays' estimate, mainly due to the sequential decline in receivables compared with Barclays' expectation of an increase.

Here's more from Barclays:

The company has achieved c60% of our full-year earnings forecast and looks on track to meet our forecast despite adverse seasonality likely in 3Q15. However, the stock's valuation at a P/E of 16x for 2015E already appropriately reflects the stronger earnings growth profile in 2015, in our view. Thus, we retain our EW rating.

Sequential recovery moderated in 2Q15; adverse seasonality ahead in 3Q15: Longyuan's operating profit for 2Q15 was broadly flat q/q and 12% lower than our estimate. This was offset by lower finance costs and a higher share of income from joint ventures and associates than we had expected, resulting in an in-line set of earnings.

The likelihood of adverse seasonality in 3Q15 means that wind power generation should moderate in 3Q15, representing a key headwind for the sequential recovery in earnings.

Capacity additions and utilization hours ahead of our estimates:Installed capacity of wind power at 14.6GW was 2% ahead of our estimate. Importantly, net additions of 0.94GW in 2Q15 implied significant growth q/q.

The company's full-year guidance is for additions of more than 2.0GW in 2015, which we believe is on track. Utilisation hours in 1H15 for both wind power (1,085 vs. our estimate of 1,075) and coal IPPs (2,618 vs. our estimate of 2,590) were marginally ahead of our estimates.

Strong cash flows help to maintain balance sheet flexibility:Operating cash flows in 1H15 at RMB8.6bn were significantly ahead of our estimate of RMB5.9bn. Better working capital management (lower receivables and prepayments) than we had expected in the quarter was the key driver of the stronger cash flows.

This was offset by higher capex at RMB7.8bn vs. our expectation of RMB6.2bn. However, the higher capex should help the company to accelerate its capacity additions in 2H15.