As coal prices continue to fall, expectations for performance have changed, and the stability of thermal power's long-term ROE center remains unchanged.
The Zhitong Finance App learned that Guangfa Securities released a research report saying that three things have jointly catalyzed the recent thermal power market: 1) the price of thermal coal continued to fall in the past month, raising electricity profit expectations for the subsequent quarter; 2) the profit growth rate of the electricity heat production and supply industry in January-January was +69.4% year-on-year, which determined that the horizontal comparison of performance improvements in the first quarter was outstanding; 3) Auxiliary service revenue of many thermal power companies nearly doubled year-on-year. Combined with the implementation of ancillary services and other policies, it has sparked fantasies about the new thermal power business model. The bank said that as coal prices continue to fall, expectations for performance have changed, and the stability of thermal power's long-term ROE center remains unchanged. It is strongly recommended to pay attention to thermal power investment opportunities as profits and stability improve.
The views of GF Securities are as follows:
The price of coal is falling steadily. What is changing from coal-fired power is electricity profit, and what has not changed is an increase in consumption value.
(1) The price of thermal coal continued to drop in the past month (Qinhuangdao Q5500 fell 86 yuan/ton to 850 yuan/ton), raising electricity profit expectations for the next quarter; (2) the profit growth rate of the electricity heat production and supply industry in January-January was +69.4% (industry ranking 6/41), which determined that the horizontal comparison of performance improvements in the first quarter was outstanding; (3) Auxiliary service revenue of many thermal power companies nearly doubled year-on-year. Combined with the implementation of ancillary services and other policies, sparked reverie about the new thermal power business model. The bank believes that the above three points have jointly catalyzed the recent thermal power market. As coal prices continue to fall, expectations for performance have changed, and the stability of the long-term ROE center of thermal power has not changed. In the face of falling coal prices, the bank also suggests a deep understanding of the consensus between coal power and coal at the industrial level. Stability is becoming one of the core demands. The bank strongly suggests focusing on thermal power investment opportunities with improved profitability and stability.
The ROE model for thermal power under electricity reform is changing, and the center will exceed 10%.
The Energy Administration clarifies the fixed cost of capacity electricity price recovery, the cost of changing electricity price recovery for auxiliary services. The bank calculates this: (1) 3,500 yuan/KW fixed asset investment corresponds to a 30% capital ratio, and the corresponding net asset is about 1,050 yuan/KW; (2) capacity electricity price: currently 30% compensation for 330 yuan/KW (increased to 50% in 2026), corresponding ROE is 6.3%; (3) Electricity price for auxiliary services: considering wind consumption requirements, corresponding to compensation of about 50 yuan/KW, the corresponding ROE is 2.5%. Subsequent rules will be gradually improved; (4) Electricity volume and electricity prices: Considering the 70% share of Changxie coal, the increase in coal consumption is also taken into account. Excluding the tax, the electricity price of 0.4 yuan/kilowatt hour can provide 1.7% ROE, and after considering a 20% increase in coal-burning standards, electricity prices in 50% of regions are above 0.4 yuan/degree. In addition, thermal power companies experienced a sharp rise in coal prices in previous years, their net assets are still damaged, and their ROE will be even higher in stages. Taken together, the ROE center will remain at 10% + as the value of thermal power generation changes from “processing industries using coal to generate electricity” to “regulated resources for wind and light consumption.”
The degree of utilitariization is measured by the ROE level and stability, and the valuation space created by thermal power is outstanding.
Hydropower's stable profit+high-quality cash flow+continuous dividends, Changjiang Electric Power's ROE is around 15% (20-21 is normal), and the dividend rate is stable at 3.6-3.7%, and the converted PB is 3 times; the quality of nuclear power assets is close to hydropower, and the ROE center is 10%, which can be expected to increase in long-term dividends. China's nuclear power PB is 2 times; the PB of thermal power companies is only 1.4 times, and the impact of net asset losses is inflated. Looking forward to the future, the thermal power ROE center is expected to remain at 10%, and dividends are also expected to increase. The increase in net assets will occur simultaneously with the increase in the valuation center, opening up space for thermal power market capitalization.
The commercialization of thermal power accelerates changes in the value of electricity.
Thermal Power suggests focusing on Zhejiang Electric Power (600023.SH), Huarun Electric (00836), high dividend Shenneng shares (600642.SH), Inner Mongolia Huadian (600863.SH), high growth Guodian (), Wanneng Electric Power (000543.SZ); Hydropower focuses on Changjiang Electric Power (Dubai), Sichuan Energy (Shui), SDIC Power (Shenzhen), SDIC Power (Shenzhen), SDIC Power (Shenzhen); Green Power focuses on undervalued Funeng shares (600483). 600795.SH 600900.SH 600674.SH 600886.SH SH); Flexibility transforms 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.