CLP Holdings: Impairment Charge to Hit 2023 Profit, Otherwise Operations Show Rebound

While it's disappointing that CLP's 2023 net profit will be dampened by a HKD 5.9 billion impairment charge, the company's guidance that the bottom line would come in around HKD 6.6 billion implies a slightly better operating performance than we originally assumed. We now expect a 2023 net profit of HKD 6.9 billion, down from HKD 10.3 billion after factoring in the impairment charge, a fair value hedging gain of HKD 2.1 billion, and a 50 basis point rise in our operating profit margin assumption. However, pending CLP's 2023 results release at the end of February, we leave post-2023 earnings assumptions unchanged as we have already incorporated rising operating efficiency. Our DCF-derived fair value estimate is unchanged at HKD 63, and we see no impact to CLP's dividend payout. In our view, CLP is fairly valued, and we see better value in CKI Holdings presently.