We Expect Higher Capital Expenditures for CLP While Australia Remains a 2023 Drag; FVE Cut

We lower our EBITDA margin estimates for CLP Holdings and raise our capital expenditures assumptions leading to a cut in our fair value estimate to HKD 66 from HKD 73. We expect fuel costs to remain elevated for longer than previously assumed particularly with China's shift to a pro growth focus and somewhat tight supply. This impacts our margin outlook. For capital expenditures, we think CLP's plan to sell or shutdown its noncore and aging China coal-fired power plants will raise the likelihood of new greenfield renewable and nuclear projects in China. EnergyAustralia, or EA, is likely to remain a drag in 2023 as its unfavorable hedges continue to roll off. But we expect that the worst is over for CLP and net profit should recover to HKD 7.3 billion in 2023 from just HKD 0.9 billion in 2022. With a stable dividend, we remain buyers.