China Resources Power Earnings: Strong Results Underpinned by Lower Coal Prices; Shares Undervalued

China Resources Power’s, or CR Power’s 39% year-on-year growth in first-half net profit to HKD 9.36 billion beat our forecast largely due to an acquisition gain of HKD 876 million and improved performance from the thermal power segment, which posted core earnings of HKD 2.71 billion, up from HKD 726 million a year ago. We raise our 2024-28 earnings estimates by an average of 7% to account for lower coal prices and our latest foreign exchange assumptions. Consequently, our fair value estimate is increased to HKD 26.50 from HKD 23.00. We think CR Power is attractive, underpinned by a 2024 dividend yield of more than 5%. We believe the pending listing of its renewable energy segment could be a positive, but we don’t expect it to happen in the near term as management is still waiting for more conducive equity market conditions.