It missed analysts' expectations, no thanks to wind tariff cut.
Longyuan’s net profit (ex-interest to perpetual notes) was +19% yoy to Rmb3,415m in 2016, which was 3% below Citi’s estimate and 5% less than consensus (Bloomberg), comprising +68% yoy to Rmb1,131m in 2H16 on a low base with much forex loss in 2H15.
"We attribute the lower than expected 2016’s net profit to a 3.6% wind tariff cut yoy. Excluding one-off items, recurrent net profit was +2% yoy to Rmb3,324m in 2016, including -11% yoy to Rmb979m in 2H16 after deducting mainly Rmb115m penalty income from wind equipment supplier Sinovel and Rmb56m trading security gain. Final DPS was +18.5% yoy to Rmb0.085," Citi said.
Here's more from Citi:
Average utilisation of Longyuan’s wind farms was +1.1% yoy to 1,901 hours in 2016, despite that grid curtailment was +1.4ppts yoy to 15.8% in the year, for improved location mix of its wind farms with more in zone 4 with above average utilisation.
The company targets the utilization to +3.1% yoy to 1,960 hours in 2017E with grid curtailment -2.8ppts yoy to 13.0% at the same time.
Average tariff of Longyuan’s wind farms was -3.6% yoy, from Rmb591/MWh in 2015 to Rmb570/MWh in 2016, as the latter included 3.85M MWh or 12.8% output sold at discounted tariffs; the discounted sales included 55% or 2.10M MWh from cross provincial sales at Rmb65/MWh (or 11%) discounts as well as 45% or 1.75M MWh from direct sale and generation quota exchange with Rmb200/MWh (or 35%) discounts. It hopes for less tariff cut yoy in 2017E.
Longyuan’s consolidated wind capacity was up 1,604MW (-29% yoy) or 9% yoy to 19,554MW in 2016, with the new add ones all being onshore.
It aims to add wind capacity of 1,500-1,700MW or 8-9% yoy in 2017E, of which 500-700MW would be offshore ones. Capex would +8% yoy from Rmb13bn
in 2016 to Rmb14bn in 2017E; average debt cost would +15bps to 4.1% in 2017E.
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