China Resources Power Earnings: Strong Results Underpinned by Turnaround of Thermal Power Segment

China Resources Power’s, or CR Power’s, first-half 2023 net profit rose 54% year on year to HKD 6.7 billion. The result beats our expectations largely due to a better performance from the thermal power segment, which delivered earnings of HKD 726 million, from a loss of HKD 1.4 billion, a year ago. We expect the thermal power segment to further improve in second-half 2023 on the back of weak coal prices. After incorporating the latest results in our model, we increase our 2023-25 earnings forecasts by 6%-13% and raise our fair value estimate to HKD 25 from HKD 22. 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.