Bank of America Securities issued a report indicating that Huaneng's first-quarter results beat expectations, that Thermal Power's profit is expected to recover further, reaffirming its “buy” rating, and that the target price for H shares was raised from HK$5.6 to HK$5.8. Considering that quarterly results beat expectations, production capacity growth is expected to accelerate this year, and unit fuel cost forecasts have been lowered, the bank raised its earnings estimates by 5% and 3% each for this year and next, and expects coal prices to experience seasonal weakness in the next quarter, driving further critical valuation.
According to the report, management confirmed good results in the first quarter, with unit fuel costs falling 14% year-on-year. The company expects electricity prices to drop moderately by only 4% year-on-year in 2024. Although the company did not provide guidance on the outlook for unit fuel costs, the bank noted that if the unit fuel cost remains unchanged in the second quarter of this year compared to the first quarter, it will drop 12% year over year. Assuming that the amount of electricity generated is the same, this may represent an annual increase of 3.5 billion yuan in pre-tax revenue. Furthermore, high-frequency data shows that thermal power generation has increased 4.8% year-on-year since April.