The Zhitong Finance App learned that Changjiang Securities released a research report saying that the “carbon neutrality” era calls and power market-based reforms will continue throughout the “14th Five-Year Plan” period, and the intrinsic value of power operators will be completely re-evaluated. Performance restoration is only the first step in interpreting the thermal power sector market. The revaluation brought about by the return of utility attributes will take over profit growth and become a new major upward catalyst for thermal power investment. Hydropower and nuclear power assets are essentially similar long-term value assets, and are at different stages throughout similar life cycles. Furthermore, in terms of green power, considering that the exact pace and timing of implementation of the policy is not yet known, the pressure on consumption and electricity prices is already reflected in the operation of wind power photovoltaic projects, so undervalued high-quality green power operators are currently the first choice to consider.

The main views of Changjiang Securities are as follows:

Thermal Power: Opening the Second Chapter of the Restoration Logic Trilogy

Changjiang Securities believes that performance restoration is only the first step in interpreting the thermal power sector market, and that the revaluation brought about by the return of utility attributes will take over profit growth and become the catalyst for a new major upward wave of thermal power investment. The return of the utility attributes of stable profitability of thermal power does not rely on relatively weak costs or increased revenue-side stability, but rather on the rationalization of the price mechanism brought about by the reform of the power system and the diversification of business models, which have brought about richer profit options for thermal power.

In this context, marketization is still the definitive direction of power system reform, and as a homogenized commodity, the cost advantage will become more and more important in the direction of thermal power stock selection in the future, and central power generation companies will have an advantage in coal insurance and supply in Changxie with stronger resources. However, since the electricity market in different provinces is not exactly the same, there are still differences in electricity in different provinces. The tight supply and demand environment in the eastern coastal provinces will provide stronger support for electricity prices in the province, while thermal power operators in East China have natural endowments in the direction of better asset allocation.

Water core: Big waves start with gold; there is a premium for certainty

Hydropower and nuclear power assets are essentially similar long-term value assets, and are at different stages throughout similar life cycles. This type of asset benefits from various reasons such as the country's sovereign credit, unique scarcity, and stable and healthy cash flow, and is the most suitable asset for discounting cash flow. The molecular side of this type of asset hardly exceeds expectations. Most of the big story of stock prices stems from exceeding expectations on the denominator side. Apart from investors in the market themselves evolving to a margin of low-cost capital and allocating long-term assets, what is more important is that as the interest rate center declines the WACC discount rate, which means that the share of cash flow generated after 5 years in net present value has increased dramatically, and the market is increasingly concerned about the stability and feasibility of long-term business models. Ultimately, the denominator side narrative requires re-examining the viability and predictability of the molecular side, while the molecular side stabilizes to the point where it is difficult to exceed expectations, and pricing is achieved through the denominator side.

The lengthening over a long period of time is essentially a process of raging. In this process, more and more nominal stable value assets will be “deceived and preserved”, while the “real money” that has actually been left behind will further increase the price of certainty.

Green electricity: break out of the thunderclouds, and you will see the glow

In the absence of a significant slowdown in the addition of wind power photovoltaics, the current increase in regulation and transmission capacity is not enough to reverse the problem of green power consumption, and the green power generation curve is unstable and difficult to predict, leading to the problem of trading discounts in terms of electricity energy value alone. This has become a “negative cycle” for green power at present. In order to overcome the difficult situation, in addition to further increasing the consumption capacity of the power system, how to make up for the low carbon and clean positive externalities of green power, that is, the economic return of green power attributes is an important option to support or even reverse the yield of green electricity.

With the introduction of mandatory green power consumption measures that can be implemented in detail in the future, the scale and price of green power transactions are expected to be further supported, which will help guarantee the reasonable yield of green power projects and smoothly promote the green transformation of the energy system. However, considering that the exact pace and timing of implementation of the policy is not yet known, the pressure on consumption and electricity prices is already reflected in the operation of wind power photovoltaic projects, so undervalued high-quality green power operators are currently the first choice to consider.

Investment advice

The call for a “carbon neutrality” era and power market-based reforms will continue throughout the “14th Five-Year Plan” period, and the intrinsic value of power operators will be completely re-evaluated. With the steady decline in coal prices brought about by the optimization of the supply and demand pattern, it is expected to catalyze marginal improvements in thermal power operations. It is recommended to focus on high-quality transformation of thermal power Huarun Electric Power (00836), Guodian Electric Power (600795.SH), China Electric Power (02380), Huadian International (600027.SH), Baoxin Energy (000690.SZ), Funeng Co., Ltd. (), and Yangtze River Delta coal power operators; the hydropower sector recommends high-quality large hydropower Changjiang Electric Power (DAB), SDIC (600011.SH 600483.SH 600900.SH 600886.SH) and Huaneng Hydropower (600025.SH); in the context of the triple bottom resonance of new energy sources, the industry invested long and night, recommending Longyuan Electric Power (001289.SZ), China Nuclear Power (601985.SH), and Three Gorges Energy (); the power grid sector recommended the Three Gorges Group, an electricity distribution pioneer that is expected to develop comprehensive energy services after entering the market, Three Gorges Water Resources (USD). 600905.SH 600116.SH

Risk warning: There is a risk that electricity supply and demand will deteriorate; there is a risk of non-seasonal coal prices; there is a risk of changes in policy orientation; and the risk of trading in the green electricity market.