20180207-川财证券-Chuancai_Research_2018_Strategy_Report__2018_China_Equity_Market_Power_Industry_Outlook_28页_2mb

报告摘要

Power Industry Summary

Core Content

The power industry in 2017 faced challenges due to high coal prices, which significantly increased operating costs and reduced overall profitability. Despite a rebound in electricity consumption, the sector underperformed compared to the broader market, particularly the CSI 300 index, by 28.41%. The power industry's P/E (TTM) was 24.09, which was 40% higher than the 5-year average, indicating potential undervaluation. The thermal power segment was the most affected, with a decline in profitability, while the hydropower segment showed some resilience.

Main Points

Thermal Power

Coal Prices and Costs: High coal prices in 2017 led to a 40% increase in operating costs for thermal power companies. Fuel cost accounted for about 70% of the main business cost, making it a key factor in profitability.
Coal-Power Linkage: The coal-electricity linkage mechanism was triggered, potentially increasing the average thermal power price by 10.34%. This could improve profitability for thermal power companies.
Profitability Volatility: Companies with high profitability volatility, such as HDPI (600027.SH) and HPI (600011.SH), are expected to benefit from the linkage mechanism.
Safety Margin: If the linkage mechanism does not start, companies with higher safety margins, such as ZHEJIANG ENERGY ELECTRIC POWER (600023.SH), may be more stable.

Hydropower

Policy Measures: Policies from NRDC and NEA helped alleviate hydropower curtailment, supporting steady growth in earnings.
Low On-Grid Price: Hydropower has the lowest on-grid price, which could be underpinned by rising thermal power prices.
Dividend Expectations: Hydropower companies are expected to maintain high dividend yields due to stable costs and steady demand.
Key Companies: CYPC (600900.SH) and HUANENG LANCANG RIVER HYDROPOWER (600025.SH) are highlighted for their strong performance and low unit production costs.

Power Distribution and Selling

Market Growth: The power distribution and selling market size reached 2 trillion kWh in 2017.
Integrated Business Models: The shift from a simple sales model to a "sales + service" model is expected to create new profit opportunities.
Focus on Integration: Companies that integrate generation, distribution, and sales, such as TGWC (600116.SH) and FULING POWER (600452.SH), are more likely to benefit from this transformation.

Key Information

Electricity Consumption: In 1-10M2017, the whole society consumed 5201.8 billion kWh, up 6.69% YoY.
Installed Capacity: National installed capacity increased by 7.33% YoY, but the growth rate slowed.
Thermal Power Capacity: Thermal power accounted for 65% of total installed capacity, with a 5.4% increase in generation capacity.
Hydropower Capacity: Hydropower capacity increased by 2.2% YoY, with a slower growth rate compared to thermal power.
Equipment Utilization Hours: The average equipment utilization hours decreased slightly, but the rate of decline narrowed.
Profitability: The power industry's net profit fell by 31.45% YoY, while operating revenue increased by 13.22% YoY.
ROE: The sector's ROE declined by 3.09% YoY, reflecting reduced profitability.
Recommendations: Investors are advised to focus on companies with potential for growth and stability, such as HDPI, HPI, CYPC, HUANENG LANCANG RIVER HYDROPOWER, TGWC, and FULING POWER.

Risk Reminder

Less-than-expected demand
Weaker-than-expected policy implementation
Surge of coal prices

Sector Rating

Rating: Increase
Date: 2018/2/7

Analysts

Li CHEN: SAC Reg. No: S1100517060001
Peng WANG: SAC Reg. No: S1100516120001
Ouwen YANG: SAC Reg. No: S1100517070002

Contact

Wenyi ZHOU: SAC Reg. No: S1100117120006
Taiyong ZHANG: SAC Reg. No: S1100117100002

Research Division

Beijing: Floor 15, China Overseas International Center, 28 Pinganli West Street, Xicheng District, 100034
Shanghai: Floor 11, Hang Seng Building, 1000 Lujiazui Ring Road, 200120
Shenzhen: Floor 21, Duty-free Building, 6 Fuhua 1st Road, Futian District, 518000
Chengdu: Floor 17, Unit B, China Overseas International Center, China (Sichuan) Pilot-free Trade Zone, 610041

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