On Wednesday, BofA Securities adjusted its stance on China Power International (2380:HK) (OTC: CPWIF), upgrading the stock from Underperform to Neutral and increasing the price target to HK$4.00 from the previous HK$3.40. The revision comes amid expectations from the company's management that a significant deal will be finalized by mid-2025 at the earliest, pending necessary approvals.
The firm has also revised its earnings per share (EPS) estimates for China Power International for the years 2024 to 2026, projecting a decrease of 4.3-0.8% due to anticipated lower wind tariffs. Despite this, BofA Securities believes that the A-share platform could potentially enhance the company's value. However, they also acknowledge the presence of uncertainty regarding the asset value and the potential for short-term interest dilution concerning the company's hydro assets.
The upgrade to Neutral was influenced by the revised price objective (PO) to HK$4.00, up from HK$3.40, reflecting a new target price-to-book (P/B) ratio of 1.1 times, increased from 0.95 times. This adjustment is based on an expected return on equity (ROE) of 10.8% in 2025. BofA Securities anticipates that more details regarding the transaction will be made available on October 18.
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