Zhitong finance and economics APP learned that Galaxy Securities released a research report that the national electricity consumption in the first two months was 1,531.6 billion kilowatt-hours, a year-on-year increase of 11.0%. The bank said that the growth of thermal power generation and the decline in coal prices jointly promoted the improvement of profitability. In the short term, it recommended the thermal power sector with policy catalysis, continuous performance improvement, and valuation space, and also focused on investment opportunities in coal-electricity integration and gas turbine industry chains. In addition, the nuclear power and hydropower have high performance certainty, strong dividend ability and long-term allocation value. The new energy installed capacity is growing rapidly, and the annual installed capacity is expected to exceed the target, with broad long-term growth space and strategic allocation at low prices.

Recommendations: Anhui Wenergy (000543.SZ), Zhejiang Zheneng Electric Power (600023.SH), Huadian Power International Corporation (600027.SH), GD Power Development (600795.SH), Huaneng Power International,Inc. (600011.SH), China Yangtze Power (600900.SH), and Sichuan Chuantou Energy (600674.SH), etc.

Event: The National Energy Administration and the National Bureau of Statistics released statistics on the power industry and energy production: The newly installed capacity of wind power in China from January to February was 9.89 GW, a year-on-year increase of 69%; The newly installed capacity of solar power was 36.72 GW, a year-on-year increase of 80%; The newly installed capacity of thermal power was 5.08 GW, a year-on-year decrease of 11%. The national electricity consumption in the first two months was 1,531.6 billion kilowatt-hours, a year-on-year increase of 11.0%.

Galaxy Securities has the following comments:

The installed capacity of new energy is growing rapidly, and the annual installed capacity is expected to exceed the target.

The newly installed capacity of wind and solar power in January and February increased by 46.61 GW, a year-on-year increase of 78%, accounting for 88% of the total newly installed capacity in the same period; By the end of February, the cumulative installed capacity of wind and solar power reached 1098.23 GW, a year-on-year increase of 40%, accounting for 37% of the total cumulative installed capacity in the same period. The "Guiding Opinions on Energy Work in 2024" clearly stated that the installed capacity of power generation in 2024 will reach about 3.17 billion kilowatts, an increase of 250 million kilowatts compared with 2023. It is expected that the newly installed capacity of new energy will exceed 200 million kilowatts (200 GW). Currently, photovoltaic components and loan interest rates are at a low level. Considering that the reduction of the red line for the absorption and consumption of new energy is conducive to increasing the growth space of new energy installed capacity, the scale of wind and solar power installation is expected to reach a new high this year. After China's renewable energy installed capacity surpasses fossil energy in 2023, the proportion will continue to increase, and the installation structure will continue to be optimized.

The growth of thermal power generation and the decline in coal prices promote the improvement of profitability.

The electricity consumption of large-scale thermal power generation in the first two months of 2023 increased by 9.7%, which was 0.4 percentage points faster than in December last year, mainly benefited from strong downstream power demand. The "Guiding Opinions on Energy Work in 2024" clearly stated that while stabilizing and increasing coal production, supply elasticity will be improved through the construction of transportation channels and reserve capacity, which is expected to drive the centralization of coal prices. Since 2024, coal prices have fallen significantly. From the beginning of the year to March 22, Qinhuangdao 5500 kcal power coal averaged 908 yuan/ton, a year-on-year decrease of 227 yuan/ton; On March 22, the market price of Qinhuangdao 5500 kcal power coal was 835 yuan/ton, a year-on-year decrease of 270 yuan/ton. At present, with the end of the heating season and the background that hydropower and new energy are squeezing coal-fired power generation, we expect that the market coal price still has room to decline. The growth of electricity consumption and the decline in coal prices will jointly promote the profitability of coal-fired power generation.

With the recovery of the economy and the impact of a low base, the total electricity consumption of the whole society achieved double-digit high growth.

The national electricity consumption in the first two months was 1,531.6 billion kilowatt-hours, a year-on-year increase of 11.0%. The electricity consumption of the primary/secondary/tertiary industries and residential areas were 19.2/95.2/28.69/27.35 billion kilowatt-hours, a year-on-year increase of 11.1%, 9.7%, 15.7% and 10.5%, respectively. In January and February, with the macro policy combination pushing forward, the economic operation continued to recover, laying a good foundation for achieving the expected 5% economic growth target for the whole year. Considering the impact of the low base last year, the year-on-year growth rate of the total electricity consumption from January to February 2023 was only 2.3%, and the two-year compound growth rate of the total electricity consumption was 6.6%, which still maintained a relatively rapid growth trend.

Risk tips: The risk of lower-than-expected installation scale; the risk of continuously high coal prices; the risk of downward adjustment of on-grid electricity prices; the risk of intensified industry competition, etc.