China Power (02380): High-Quality Stock in the Power Sector, with SPIC Continuously Increasing Its Stake to 64.01%

Thursday, 25 January 2024, 16:42 HKT/SGT

HONG KONG, Jan 25, 2024 - (ACN Newswire) - Zhitong Finance APP learned that according to the latest information from the Stock Exchange of Hong Kong Limited, China Power (02380) has received continuous increase in holdings from its controlling shareholder, State Power Investment Corporation Limited (SPIC). As of January 23, the shareholding was 64.01%, with a total increase of approximately 126 million shares in the past two months. Since the end of August 2023, the controlling shareholder of China Power has been increasing holdings, including a cumulative increase of about 370 million shares this year, with a 3% increase in shareholding.

SPIC is fully optimistic about the future development of China Power. On the one hand, it continues to inject clean energy assets into its subsidiary, making the new energy power transformation of China Power ahead of its peers; on the other hand, by increasing holdings, it has proven its optimistic attitude to the market with real gold and silver. SPIC has announced that from October 2023 to June 2024, it will continue to increase its holdings of China Power in the open market, with a total amount not exceeding HKD 2 billion.

With the support of SIPC, China Power has become a benchmark for the transformation of the power industry. For example, from announcing the acquisition of five wind and photovoltaic companies under the controlling shareholder at the end of July 2023 to completing the acquisition in October, it only took about two months, indicating that China Power's capital operation efficiency is high. After the take-over, China Power's new energy installed capacity accounted for over 75%, an increase of over 10 percentage points compared to the 2022 fiscal year. In the future, SPIC may continue to inject its clean energy into its listed platforms, enabling China Power to continue to lead the new energy power industry.

China Power is also performing well, as the results of its clean energy transformation are outstanding. Driven by the increase in wind power and photovoltaic installed capacity and high profit margins, China Power's revenue has grown steadily, while its profit performance has been strong. In the first half of 2023, the net profit of shareholders reached 1.85 billion yuan, setting a new high in mid-term profits in the past seven years. China Power is actively giving back to shareholders by paying dividends every year. In 2019, SPIC promised a dividend payout ratio of no less than 50%, and based on the current market value, it is expected that the dividend yield will exceed 5%.

It is worth noting that in recent years, the Hong Kong stock market has been in a weak downturn, and the valuations of high-quality stocks in various sectors have also been "slaughtered". Some of the underlying stocks have offered a combination of repurchase and increased holdings to stabilize their stock prices. Repurchase can stabilize the stock price, but it can weaken the company's financial resources to a certain extent. Shareholder increase is an inflow of external funds, indicating that investors are fully optimistic. Generally speaking, if high-quality companies continue to experience a pullback in valuation, shareholders, especially controlling shareholders, will increase their holdings.

However, in situations where most companies choose to do nothing, companies that actively take action will have a strong stock price and outperform the market. For example, in the case of China Power, its major shareholder, SPIC, has responded quickly, reflecting the spirit of responsibility of central state-owned enterprises. Since August last year, SPIC has taken practical actions to maintain the stability of the stock prices of its listed companies, fully reflecting its determination to safeguard the interests of all shareholders and its high recognition of the prospects and value of its flagship listed company, China Power. During this period, the stock price of China Power has steadily increased, recording a 3.8% increase this year, outperforming the Hang Seng Indexes by 10.5 percentage points.

Adversity will become a thing of the past. Recently, the State has intensively introduced supportive policies to support the sound development of the capital market. For example, on January 23, the Hong Kong Securities and Futures Commission released a three-year (2024-2026) strategy, focusing on the development of Hong Kong's securities market and the approach to addressing risks and protecting investors. On January 24, the State-owned Assets Supervision and Administration Commission of the State Council announced that it will further study the inclusion of market capitalization management in the performance appraisal of the heads of the central state-owned enterprises; The People's Bank of China announced a reduction in reserve requirements and interest rates, and will lower the reserve requirement ratio by 0.5 percentage points on February 5, providing the market with long-term liquidity of about 1 trillion yuan.

Stimulated by the news, the Hong Kong stock market recorded two consecutive trading days of gains, greatly enhancing market confidence in shareholding, and major securities firms are also optimistic about the 2024 market. China Power, as an undervalued (PB only 0.87 times, high dividend yield) high performing stock, has received continuous increase in holdings from controlling shareholders, while southbound funds have also continued to buy (net purchase of 78 million shares this year). With the overall market warming up, valuation will also be rapidly restored.