China Utility & Clean Energy Sector:Beneficiaries and Victims of Rmb Interest Rate Hike能源行业

研究机构：花旗环球金融 分析师： Pierre ... 撰写日期：2011年02月08日

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Summary – PBOC announced its first interest rate hike of 2011, raising Rmbdeposit rates by 4-45bps and lending rates by 20-25bps, effective 9 February. Webelieve the rate hike is positive for power equipment makers, mildly negative fordownstream gas distributors, and highly negative for PRC IPPs. Given concerns in2011 on rising inflation and interest rates, we prefer Dongfang Electric due togrowing nuclear power equipment demand, ENN for high (25% pa) net profitgrowth from rising penetration, and Longyuan for profit growth from new capacity.
PRC power equipment makers benefitting from Rmb rate hike – All three largepower equipment makers – Dongfang Electric, Harbin Power and ShanghaiElectric – have high cash balances (Rmb10-22bn by end 2010E) from customerprepayments (Rmb14-36bn) for orders on hand. They earn interest income fromthe cash balances, but without paying interest cost on the customer prepayments.
For every 25bps Rmb interest rate hike, Dongfang’s 2011 net profit rises by 1.2%.
PRC downstream gas distributors mildly hurt by Rmb rate hike – Thesecompanies are in net debt, with average net debt-to-equity ratio of 41% at end-2010. Among them, we see lower Rmb interest rate risks for ENN and BeijingEnterprises given positive free cashflow and declining gearing ratios. For every25bps Rmb interest rate hike, their 2011 net profits are cut by only 0.6%.
PRC IPPs highly impacted by Rmb rate hikes – This is the most highly leveredsector in the PRC universe (average 239% net debt-to-equity by end-2010), hencevulnerable to interest rate hikes. Among them, Huadian Power is the most highlylevered (423% net debt-to-equity ratio) while Longyuan is the least (99%). Every25bps Rmb interest rate hike would cut Longyuan’s 2011 NP by Rmb55m or 2%.