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Yangtze River Power (600900) Important Events Comment-Long-term strategic significance of acquiring 23% equity in Jinzhong

Yangtze River Power (600900) Important Events Comment-Long-term strategic significance of acquiring 23% equity in Jinzhong
Company with 48.98 trillion cash acquired 23% equity of Jinsha River Midstream Hydropower from Datang Yunnan, and a share purchase agreement has been signed. We expect to increase the installed capacity of equity.8% or 128.550,000 kilowatts.Jinzhong Company’s assets are scarce. After the company’s shareholding, it is expected to accelerate the pace of Jinzhong unit construction and strengthen the river basin coordination with the company’s holding power plant, which will have better long-term strategic value for the company.Maintain “Buy” rating and target price of 20.10 yuan. Purchased 23% equity of Jinzhong Company in cash to increase equity installed capacity 2.8%.Company announcement with 48.98 trillion cash acquired 23% of the shares of Huadian 北京夜生活网 Jinsha River Midstream Hydropower owned by Datang Yunnan. On December 30, 2019, an equity purchase agreement was signed.After the transaction is completed, the company will become the second largest shareholder of Jinzhong Company.Jinzhong Co., Ltd. currently has an installed capacity of 4.4 million kilowatts and 118 shares of equity.920,000 kilowatts, 7.2 million kilowatts of installed capacity in the early stages of the generator, the company’s equity installed capacity will increase after the acquisition is completed28% or 128.550,000 kilowatts to 4,678.05 million kilowatts. It is estimated that the overall performance is moderate, and the target performance has improved significantly.The M & A consideration corresponds to the overall valuation of Jinzhong Company 212.9 trillion US dollars, equivalent to a discount of 19 in January and December 2019 Jinzhong Company’s two equity transactions.9% / premium 17.2%.The purchase price corresponds to the 2018 P / E valuation of Jinzhong Company2.7 times, slightly lower than the company’s P / B in the same period.The benchmark date for this transaction is December 31, 2018, and the performance of Jinzhong in 2019 will increase the company’s performance for the year.Jinzhong Company’s consumption has improved since 2019, driving a large increase in performance, 2018 / 2019Q1?3 Net profit is 0.8/3.30,000 yuan, corresponding to the company’s 19Q1-3 pro forma investment income of 0.800 million. Jinzhong Investment may speed up, and the joint scheduling potential is significant.The Jinsha River midstream hydropower is located upstream of the company and the group’s subordinate power generation, and is a scarce and high-quality large-scale hydropower.The Longpan Reservoir in the Jinzhong Basin has many years of regulation capacity. After the power plant is put into operation in the future, it is expected to significantly increase the downstream company-controlled power generation, with an additional generation of more than 10 billion kilowatt hours.After the company’s shareholding, the company will help the company to play its role as a shareholder, promote the accelerated investment and construction of Jinzhong’s units under construction, and increase the downstream power generation controlled by the company.In addition, after the company’s 23% stake in the company, it will be eligible to assign directors to Jinzhong Company, which will improve the feasibility of joint upstream and downstream scheduling. Risk factors: The water supply is lower than expected, the electricity price growth is down, and the performance of Jinzhong Company is lower than expected1.01/1.01/1.04 yuan, corresponding to dynamic P / E is 18/18/18 times.Corporate bonds have outstanding attributes, and the expected dividend yield of nearly 4% can cover 10-year government bond yields, which is attractive.Combined with DCF estimation, it is maintained at 20.Target price of 10 yuan and “Buy” rating.