Macquarie Research initiated coverage on CGN Power (01816) with an "outperform" rating and target price of HK$3.5, based on a PER of 20x in 2015, which looks justified to us given its high EPS CAGR of 19% in 2014-17.
The research house believes CGN Power's solid project pipeline and supporting government policies could help it generate strong earnings growth and with high certainty.
Being the sole platform for its parent CGNPC to develop nuclear power, CGN has a clear potential to acquire Fangchenggang Nuclear as well as obtain a higher tariff for Taishan Nuclear - a catalyst to achieve Macquarie's bull-case valuation of HK$4 in 1-2 years.
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