CLP: Australian Revenue Uncertainty Offset by China Growth

We keep our fair value estimate for CLP Holdings at HKD 63 per share after raising our five-year profit outlook, but with lower income after 2028. We factor in a pickup in near-term growth in China profit contributions as renewable generation capacity is added, but we also increase the impact from the scheduled 2028 decommissioning of its 1,480 megawatt Yallourn coal-fired power plant to its Australian contributions. However, this has a limited impact on our valuation as we expect annual free cash flow to remain at HKD 10 billion-HKD 12 billion, similar to that seen in 2016-20. We think CLP is fairly valued, given its present outlook. Our valuation prices CLP at 12.5 times 2024 price/earnings and 1.4 times price/book, close to the average of its historical range.