According to Zhito Finance APP, sinolink released research reports stating that as the 14th Five-Year Plan concludes, large power investments have begun operating and entering the performance contribution phase. Combining the macro strategy of chasing growth, focusing on 'searching for new energy & eco-friendly concept installations/valuation flexibility' and 'searching for traditional power installations/coal price flexibility,' key areas of focus can be identified within each sub-sector: regional wind power/ regional thermal power/nuclear power and hydropower with incremental installations, high proportion market thermal power, and solid waste operations affected by prior impairment provisions.

Sinolink Securities' main points are as follows:

Macroeconomic outlook: policy intensification, searching for growth flexibility.

Due to the continuous weak influence on macro expectations since the beginning of the year, the utilities sector has seen a strong increase prior to the implementation of the '924' financial policy package; starting in September, multiple financial policies have intensified to support high-quality economic development, releasing signals for economic stability, market stability, and stabilized expectations, boosting market risk appetite, and growth style symbols with certain incremental performance are expected to gradually gain an advantage.

In addition, after Trump's election, external environmental uncertainties have increased, and fiscal policies are expected to continue to strengthen, further boosting market expectations and enabling thematic investments to dominate; the implementation of debt reduction policies is expected to improve local government cash flow, bringing valuation recovery flexibility to sectors with a higher proportion of toG business or government subsidies.

Fundamental outlook: demand support, supply differentiation, speed up electricity reform.

(1) Supply and demand tracking: On the demand side, the new energy industry chain and auto manufacturing are driving a new wave of high energy consumption, supporting the power demand in 2025. On the supply side, the limited commissioning of supportive power sources in the first half of 2025 may still lead to tight power supply and demand during the peak electricity usage period in eastern china before summer.

(2) Electricity reform process: With the newly built thermal power generation coming online and the significant increase in new energy installed capacity during the 14th Five-Year Plan, this will accelerate the construction of the spot market. From the perspective of 'within price', the impact of new energy will lead to a drop in average electricity prices, while thermal power can earn peak guaranteed supply prices in the spot market, and new energy can also reduce price volatility through long-term contracts; from the perspective of 'outside price', thermal power can alleviate anxiety about insufficient long- and medium-term contract volumes through capacity compensation, and the gradual clarification of the pricing mechanism for new energy environmental value trading is expected to alleviate concerns about discounted prices for new energy in the market.

Looking for installed capacity/valuation elasticity in new energy & eco-friendly concept.

Idea ①: Focus on regional wind power with stable profits and growing installed capacity. It is recommended to continue paying attention to the accelerated development of offshore wind: on one hand, offshore wind maintains a high wind speed throughout the year and has the potential to become a clean and stable power source (similar to nuclear power positioning); moreover, there is sufficient reserve of offshore wind projects, with the newly installed capacity for China's offshore wind during the 15th Five-Year Plan expected to reach about 0.1 billion kilowatts, and there is ample development space in deep-sea areas.

Idea ②: Focus on solid waste operation with positive cash flow and rising capacity utilization/ orders. In recent years, the leading companies in core cities have passed their peak CAPEX period, and there is still room to improve capacity utilization; furthermore, the marketization of sanitation is still advancing, and some leading companies have significant advantages in obtaining integrated l orders.

Idea ③: Debt restructuring leading to repair of three statements and valuation elasticity. On one hand, there has been a longstanding premium for A/H shares, and looking at the receivable/market cap indicators, Hong Kong stocks rank near the top; the asset valuation in the Hong Kong market typically deducts based on receivable amounts, thus leading to substantial valuation elasticity after repair; furthermore, ToG operators involved in debt do not have compliance issues, thus the risk of impairment is relatively low, leading to greater bounce back elasticity.

Looking for installed capacity/coal price elasticity of traditional power sources.

Idea ①: Finding definite 'volume increase' in an environment where the coal and electricity price difference is flat or slightly declining. It is recommended to pay attention to regional thermal power generation with CAPEX landing and increasing installed capacity in this round. For instance, it is expected that the supply and demand in anhui in 2025 will still be relatively tight, and the regional thermal power leader an hui wenergy has several thermal power units under construction that are expected to connect to the grid by the end of 2024, driving a 19.2% increase in operating units, which will largely be released in 2025.

Idea ②: Under the "Trump 2.0" economic and trade policy, if international marine transportation coal prices decline significantly, the bottom support formed by domestic thermal coal medium- and long-term contract prices may be breached, thereby expanding the decline in market coal prices, which will bring performance elasticity to coastal thermal power companies like zhejiang zheneng electric power and huaneng power international, inc. that have a high proportion of market coal procurement.

Idea ③: Recommended to pay attention to relevant beneficiaries of zhangzhou nuclear power and dada river hydropower operations, which are expected to release installed capacity elasticity in 2025-2026.

Investment advice:

Green power: yunnan energy investment (002053.SZ), china longyuan (00916);

Thermal power: an hui wenergy (000543.SZ), zhejiang zheneng electric power (600023.SH);

Nuclear power: china national nuclear power (601985.SH).

Risk warning: The pace of electricity reform is slower than expected; electricity supply and demand pattern is easing; coal prices may rise; profitability of new energy entering the market declines; risks from debt reduction policies not being implemented as expected, etc.