IPP
, Hong Kong

CR Power beats estimates with HK$1.43 headline EPS

Strong cash flow also a key highlight.

CR Power reported a strong set of results with headline EPS 6% ahead of Barclays' estimates at HK$1.43.

According to a research note from Barclays, a key highlight was the strong cash flow, 32% ahead of Barclays' estimates and leading to a 25% y/y increase in the interim dividend.

Net debt at HK$88.4 billion was 7% lower than Barclays' estimates. Power generation was strong in 1H'15 delivering an 8% y/y increase.

Stronger capacity additions in 1H'15 and ramp-up of an earlier commissioned plant were key drivers. Although the company expects capacity additions to remain strong in next 12-18 months, the outlook for power demand is likely to remain subdued in 2H'15.

Here's more from Barclays:

Headline results ahead of expectations: Reported EPS at HK$1.43 was 6% ahead of our estimates, while the operating profit was 12% ahead of our forecasts. Impairment loss of HK$1.2 billion and higher minorities offset the impact of strong underlying numbers.

Fuel costs declined 19% y/y to RMBc15.6/kWh and were marginally lower than our estimates. The proportion of renewable energy increased marginally to 15% in 1H'15, compared to 14% in 1H'14.

Coal mining however was loss making in the first six months. Impairment of HK$1.2 billion was mainly attributable to the power business (HK$451mn), bad debts (HK$226mn) and goodwill write-off (HK$195mn).

Strong cash flows, dividend increase: Operating cash flows at HK$15.3 billion were 32% ahead of our estimates and increased 20% y/y. Strong underlying earnings and lower working capital were the key drivers.

The company increased its interim dividend by 25% y/y to HK$0.10/share, which we believe reflects the growing confidence of management for cash flows to remain strong in the medium- to long-term.

Cautious outlook for 2H'15, capacity additions to continue: Despite the increase in absolute power generation due to organic growth in 1H'15, utilization hours declined 8.2% y/y on a same plant basis.

The company expects power demand in its key operating regions to remain subdued in 2H'15, although the ramp-up of plants will help keep its power generation higher on an absolute basis. CR Power expects to commission a 1.3GW power plant in 2H'15, while 4.2GW of power plants are likely to be put under construction to support its medium-term growth pipeline. 

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