CGN Power's net profit up 32.5% to CNY5.4b

But it didn't beat an analyst's estimate.

CGN Power recently announced its 2014 results, with net profit attributable to shareholders coming in at CNY5,713mn, up 36.2% y-y.

According to a research note from Nomura, stripping out one-off items (i.e. FV change on financial assets, FX gains, IPO expenses), the recurring net profit increased 32.5% y-y to CNY5,385mn, in line with Nomura's estimate of CNY5,404mn but slightly lower than consensus of CNY5,500mn by 2.1%.

The company announced a final DPS of CNY0.0025, above Nomura's expectation of no final DPS for 2014.

Here's more from Nomura:

Takeaways from the company’s 2014 analysts’ briefing - Taishan project’s construction progress is well on track: Per the management, 95% of the equipment has been delivered to the field and nearly 85% of them has already been installed.

The company expects the CFT (Cold Function Test “冷试”) of unit #1 to start in May/June, which is on track to the original schedule, with official commissioning in 1H16. For unit #2, the company believes the commencement date will be within 10 months after Unit #1.

At present, the on-grid tariff for Taishan has yet been finalised and should be fixed when the project approaches the official commissioning. The management is confident of setting a tariff with the National Development and Reform Commission (NDRC) which allows a reasonable return for the first 3G nuclear project. For the other nuclear power projects, there is no change in the schedules for commercial operation as stated in the IPO prospectus.

No tariff linkage mechanism between nuclear and coal-fired power: Given the two rounds of coal-fired on-grid tariff cut in Sep 2013 and 2014, together with the expectation of another cut in the near term, investors generally have concerns on the likelihood of nuclear power tariff adjustment. The company stated that the approved on-grid tariff for the current projects on hand will not be adjusted even with coal-fired power tariff cut.

Utilisation guidance remains unchanged: We believe investors should acknowledge that there is pressure on the utilisation of CGN Power’s newly commenced projects given: 1) the relatively weak power demand in north-eastern China in 2014 which is likely to be sustained in 2015F, where Hongyanhe project is located; and 2) as three new generation units, Yangjiang unit #1, Ningde unit #2 and Hongyanhe unit #2, commenced operation in 2014, the first outage will be conducted in 2015 which is expected to last for 80-90 days.

That said, the company has managed to accelerate some works for the first outage during the slack season in the Chinese New Year holiday, which should reduce the outage impact on utilisation hours to some extent. In addition, any negative earnings impact from lower utilisation will be partially offset by the lower depreciation and
fuel costs which are linked to the power generation output.

Currently, in our model, we assume long-term 7,500 utilisation hours for all nuclear units, which has already considered the utilisation issues or even being slightly conservative on the utilisation assumption.