China Resources Power’s 2022 Results Disappoint; Potential Listing of Renewable Segment a Positive

China Resources Power’s, or CR Power’s, 2022 net profit rose significantly to HKD 7.0 billion from HKD 2.1 billion in 2021 on the back of lower loss from its thermal power segment. However, this is below our expectation due to higher-than-expected coal costs. We expect earnings from the thermal power segment to further improve in 2023 given falling coal prices and a higher volume sourced from long-term lower-priced coal contracts. After rolling forward our earnings forecasts and considering the stronger Chinese yuan, we raise our fair value estimate to HKD 22.00 from HKD 20.50. We think CR Power is undervalued, with recovery in profitability and the pending listing of its renewable energy segment likely to support share price performance.