BOC International has issued a research note stating that Yankuang Energy (01171) has agreed to acquire New Energy Group from its parent company for RMB 15.57 billion.

Concurrently, the company has also agreed to purchase Shandong Energy Power Sales Co., Ltd. from its parent for RMB 845 million.

The core business of the target assets is power generation.

The report notes that the seller has guaranteed a total net profit for New Energy Group of no less than RMB 3.06 billion for the period 2026-2028.

Based on this guaranteed profit, the transaction values New Energy Group at approximately 15 times its 2026-2028 price-to-earnings ratio, which is significantly higher than the high single-digit P/E ratios typical for most China-listed power generation companies in Hong Kong.

While the implied yield based on the guaranteed profit is 6.5%, the earnings accretion is not expected to be substantial.

This is because Yankuang Energy has a relatively high gearing ratio and will likely require external financing to complete the transaction.