China National Nuclear Power:Q1-Q316power generation data show utilization hours remain under pressure
CNNP's power generation up 12.8% YoY in Q1-Q316
Data released by CNNP showed total power generation volume rose 12.8% YoY to64.13bn kWh in Q1-Q316, in line with our expectation, as the figure is equivalent toc75.6% of our full-year estimate.
Utilization of nuclear units still on downward trend
In spite of the 12.8% rise in Q1-Q316power generation, we noted a clear downwardtrend in the utilization of CNNP's nuclear units, given that the installation growth of17.8% YoY far outpaced the power generation growth. The main utilization declineswere observed at the Fuqing and Qinshan units. We estimate CNNP's Q1-Q316powergeneration implies utilization hours of 5,571, down 4.2% from the same period lastyear (5,817hours).
Nuclear utilization to remain under pressure
We see a mixed impact from guaranteed nuclear utilization hours, with impliedguaranteed utilization hours lower than current actual operating hours in someprovinces despite the release of a related policy this year (see our earlier note "Mixedimpact likely from guaranteed nuclear utilization hours"). Meanwhile, we believe theacceleration in solar/wind installations and implementation of guaranteed solar/windutilization hours will further cut into nuclear utilization. Therefore, we expect nuclearutilization to remain under pressure.
Valuation: Lowering DCF-based price target to Rmb7.5from Rmb7.9
After cutting our 2016-18utilization hours assumption slightly to 6,900from 7,000,we lower our 2016-18E net profit 4%/4%/3%. As a result, our DCF-based price targetfalls to Rmb7.5(WACC 5.6%) from Rmb7.9. We maintain our Neutral rating.