Currently, thermal power is in a “moment of disagreement” from cycle to value. It is recommended to pay attention to the industry trend where coal prices are stabilizing, and pay more attention to the verification and pricing opportunities of thermal power utilities under increased ROE stability.
The Zhitong Finance App learned that GF Securities released a research report saying that thermal power will revolve around the ROE model and move towards a new value market trilogy: (1) coal price stabilization and capacity price implementation at the end of April to confirm that the profit center is rising and sustainable, while implementing good capacity electricity prices contribute to stabilizing ROE sources; (2) starting in May, auxiliary services in various provinces will be intensively released to confirm the ROE contribution brought by auxiliary services; (3) Starting in August, some provinces will begin signing electricity prices in 2025 to confirm whether the electricity price reflects the cost of coal consumption and will usher in The performance reported in the interim has increased rapidly, and the linkage between coal and electricity may also be Accelerate. Currently, thermal power is in a “moment of disagreement” from cycle to value. It is recommended to pay attention to the industry trend where coal prices are stabilizing, and pay more attention to the verification and pricing opportunities of thermal power utilities under increased ROE stability.
The main views of GF Securities are as follows:
As a thermal power plant “on the left side of the regulation of costs by the whole society”, the ROE model will be verified
GF Securities continues to emphasize that thermal power is moving from “pure power generation assets” to “regulating resources,” and is on the left side of the whole society's cost adjustment. The relevant price mechanism is already clear. The Energy Administration proposed three pricing mechanisms for thermal power, namely fixed cost of capacity electricity price recovery, variable cost of electricity price recovery, and auxiliary service recovery adjustment costs. According to GF Securities estimates, the ROE corresponding to the electricity price for capacity is 6.3%, the ROE corresponding to the electricity price for ancillary services is 2.5%, and the total ROE is expected to remain above 10%. Furthermore, after experiencing a sharp rise in coal prices in previous years, the net assets are still being damaged, and the ROE phase will be even higher. Combined with company data, the new model where thermal power contributes the main profit from capacity and ancillary services will continue to be validated.
Utilization interpretation: hydropower continues to lead, nuclear power accelerates interpretation, thermal power catches up
Improvements in incoming hydropower and energy storage have entered a new stage in the market. Changden PB has tripled, and the valuation of DDM can be expected to increase. Nuclear power has continued to be utilised since last year. The asset quality is close to hydropower. The ROE center is 10%. Long-term dividends can be expected, and China's nuclear power PB has more than doubled. Thermal power will become the next major utility. Pure thermal power companies' PB is only 1.3 times (net assets were severely damaged by high coal prices before, and net assets will be greatly increased every time statements are published), and looking forward to the future, dividends will also increase. Hydropower and nuclear power are being protected, and the commercialization of thermal power is the general trend.
Utilization accelerates changes in the value of electricity.
Thermal Power focuses on Zhejiang Electric Power (600023.SH) and China Resources Electric Power (00836), which have both high ROE+ dividend+high growth; Huadian International (01071), Shenneng (600642.SH), Inner Mongolia Huadian (600863.SH); Guodian Electric Power (), Waneng Electric Power (000543.SZ), which have high growth targets; Hydropower focuses on Yangtze River Electric Power (Dubai), Sichuan Investment Power (Sichuan), and SDIC Power (SIC); Green Power focuses on 600795.SH 600900.SH 600674.SH 600886.SH Undervalued Funeng Co., Ltd. (600483.SH) and Jidian Co., Ltd. (000875.SZ); Flexibility to transform Qingda Environmental Protection (688501.SH).
Risk warning: reforms fall short of expectations; coal prices have risen more than expected; Green Electric's installation progress is low.