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<Research>Daiwa Downgrades CHINA RES POWER (00836.HK) to Hold, Slightly Trims TP to $20
Recommend 17 Positive 28 Negative 23 |
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Daiwa commented in a report that coal-fired independent power producers (IPPs) have seen their earnings increase sharply in 1Q24 amid falling coal prices, with shares of CHINA RES POWER (00836.HK) hiking 22% year-to-date, outperforming the 17% YoY rise by HUANENG POWER (00902.HK), even though CR POWER is less leveraged, with only 72% power generated from coal compared to HUANENG's 88%. The broker expected the downward trend in coal prices to be reflected in the share prices of coal-fired IPPs. However, coal price has rebounded recently, while CR POWER may face a high base in its 3Q earnings. In addition, the broker remained bearish on renewable energy IPPs, as it believed that renewable energy headwinds and tariff issues have not yet been reflected in the share price. CR POWER's wind power generation grew 17% YoY in 1Q, outperforming peers CHINA LONGYUAN (00916.HK) and DATANG RENEW (01798.HK) and partially offsetting the impact of lower electricity tariffs. However, CR POWER's growth came on top of a 20% increase in installed wind power capacity last year, which could mean lower utilisation rates for wind power. The broker adjusted downwards its forecast on the YoY decline in renewable energy tariffs this year from 1.8% to 3.7%. Daiwa's updated pecking order for the China IPP sector is hydropower, coal-fired, nuclear and finally renewables. After review, the broker downgraded its rating on CR POWER from Outperform to Hold and trimmed its target price slightly from $20.4 to $20. Daiwa recommended investors to take profit. AAStocks Financial News |
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