Smart Finance and Economics App learned that China Galaxy Securities released research reports stating that it is bullish on the thermal power sector that has policy catalysts, continuous performance improvement, and valuation potential; it is optimistic in the long term about the hydropower and nuclear power sectors with high performance certainty and strong dividend capabilities. New energy is already in the bottom area. Individual stock focus on Huaneng Power International (600011.SH), An Hui wenergy (000543.SZ), Sichuan Chuantou Energy (600674.SH), China Yangtze Power (600900.SH), CGN Power Co., Ltd. (003816.SZ) and others.

China Galaxy Securities' main points are as follows:

Event: The National Energy Administration and the National Bureau of Statistics released statistics on the electrical industry and energy production: From January to August, the national wind power added capacity of 33.61GW, a 16% year-on-year increase; the national solar power added capacity of 139.99GW, a 24% year-on-year increase; the national thermal power added capacity of 28.59GW, a 17% year-on-year decrease. From January to August, the total national electricity consumption was 6,561.9 billion kilowatt-hours, a 7.9% year-on-year increase.

In August, wind power installation achieved high growth, and solar power installation remained stable with an upward trend. In August, the newly installed wind power and solar power were 3.7GW and 16.46GW respectively, with year-on-year increases of 41.8% and 2.9% respectively; by the end of August, the cumulative installed capacity of wind power and solar power reached 1,226GW, a 36.1% year-on-year increase, accounting for 39.2% of the cumulative national installed capacity during the same period. The State Grid Energy Research Institute predicted in the "China Power Supply and Demand Analysis Report 2024" that the annual new wind power capacity would reach 90GW, a 16.5% year-on-year increase; solar power new capacity would further increase to 240GW based on the high base of 2023, an 8.8% year-on-year increase, breaking through 200GW for two consecutive years. After renewable energy installation exceeded fossil energy in 2023, the proportion will continue to increase, and the installation structure will continue to optimize in China.

In August, hydropower generation decreased significantly, while thermal power generation speed turned positive. In August, the industrial electricity generation of regulated entities reached 907.4 billion kilowatt-hours, a 5.8% year-on-year increase, with a speed increase of 3.3 percentage points over July; in August, the industrial electricity generation of regulated entities for thermal power / hydropower / nuclear power / wind power / solar power increased by 3.7% / 10.7% / 4.9% / 6.6% / 21.7% respectively. In August, the speed of thermal power generation increased by 8.6 percentage points compared to July for the first time since May turned from negative to positive; the speed of hydropower generation in August dropped significantly by 25.5 percentage points compared to July. Considering the transition from dry to wet conditions since August last year, it is expected that the speed of hydropower generation will enter a downward channel in the fourth quarter, reducing the squeezing effect on thermal power generation, and the speed of thermal power generation is expected to continue to rise.

In August, the growth rate of electricity consumption accelerated, with a significant increase in electricity consumption for the tertiary sector and residential life due to high temperatures. In August, the total electricity consumption was 964.9 billion kilowatt-hours, a year-on-year increase of 8.9% (compared to a 5.7% year-on-year increase in July), with a 3.2 percentage point increase over July. Among them, the electricity consumption for primary/secondary/tertiary/ residential life was 149/567.9/190.3/191.8 billion kilowatt-hours respectively, with year-on-year increases of 4.6%/4.0%/11.2%/23.7%, compared to July, the speed changes were +3.1pct/-1.0pct/+3.4pct/+17.8pct. In August, economic data was weak, with industrial added value +4.5%, a decrease of 0.6 percentage points from July, and the year-on-year increase in total retail sales of consumer goods was +2.1%, a decrease of 0.6 percentage points from July. We believe that the significant increase in the growth rate of electricity consumption for the tertiary sector and residential life in August was mainly due to the impact of high temperatures. According to data from the China Meteorological Administration, in August, the average national temperature was 22.6°C, 0.65°C higher than the same period last year, and 1.5°C higher than the same period in a normal year, the highest in history since 1961.

Investment advice: Bullish on the thermal power sector with policy catalysts, continuous performance improvement, and valuation upside; long-term bullish on hydropower and nuclear power sectors with high performance certainty and strong dividend capabilities. New energy is already in the bottom area. Stocks to watch include Huaneng Power International, An Hui Wenergy, Sichuan Chuantou Energy, China Yangtze Power, CGN Power Co.,Ltd., etc.

Risk warning: Risks of lower-than-expected installed capacity; risks of significant increase in coal prices; risks of reduction in on-grid electricity prices; risks of intensified industry competition, etc.