The Zhitong Finance App learned that in early trading on May 24, the power sector set off a tidal wave, and many stocks such as Dalian Thermal Power (600719.SH), Jiuzhou Group (300040.SZ), and Hunan Development (000722.SZ) rose and stopped. Analysts believe that the main reason for the change in the electricity sector in early trading today is that a high-level meeting held yesterday put forward opinions and suggestions on deepening the reform of the power system and developing venture capital, while power system reform ranked first. Guosheng Securities said that the pace of electricity market construction will be further accelerated this year. It is expected that construction will accelerate in the spot market, auxiliary services, etc., and that medium- to long-term transactions, which are already mature, may be further improved. Related targets: China Resources Electric Power (00836), Huadian International Power Co., Ltd. (01071), Datang New Energy (01798), Huaneng International Power Co., Ltd. (00902).
From 2002 to 2015, the first round of deepening the reform of the power system was carried out. From 2015 to 2021, the second round of deepening the power system reform. Since 2021, electricity price reform has been fully liberalized. Since this year, electricity reform expectations have continued to catalyze the electricity stock market, and the game surrounding electricity prices has also become the main logic for the market to focus on electricity stocks.
This month, the National Development and Reform Commission issued the “Basic Rules for the Operation of the Electricity Market” to promote more market-based transactions in electricity volume, capacity, and ancillary services. The new regulations will come into effect on July 1, 2024. Among them, market members have added new types of business entities such as energy storage companies, virtual power plants, and load aggregators.
Earlier, on May 15, the National Development and Reform Commission issued the “Notice Concerning Provincial Grid Transmission and Distribution Prices and Related Matters in the Third Supervision Cycle”, which approved the transmission and distribution prices to be implemented by provincial power grids in the next three years, which also promoted the deepening implementation of electricity reform.
The recent electricity reform has become a hot topic in the market. GF Securities also pointed out that electricity prices are first introduced and then fully marketed: the reform must first reflect all the values of each power source (such as environmental value, adjustment value, base load value, coal cost), and secondly, market-based transactions introduce a large proportion of green electricity (if the electricity price mechanism is not perfect, it can easily lead to price extremes).
On May 23, the National Energy Administration released national power industry statistics for January-April. By the end of April, the country's cumulative installed power generation capacity was about 3.01 billion kilowatts, an increase of 14.1% over the previous year. Among them, the installed capacity of solar power generation was about 670 million kilowatts, an increase of 52.4% year on year; the installed capacity of wind power was about 460 million kilowatts, an increase of 20.6% year on year.
CITIC Construction Investment said that the purpose of the electricity reform is to reflect electricity supply and demand, use price signals to promote resource allocation, increase consumption of new energy sources, and increase enthusiasm for investment in transmission and distribution. Favourable directions: New energy+ energy storage, flexible resources such as electrochemical energy storage, thermal power flexibility transformation and savings, and energy metering.
Haitong International pointed out that the power sector has investment value. The valuation of power leaders has been in the low range for a long time, and profits can be expected to rise in 2024. Thermal power is low profitable and undervalued. Overseas power leading PE is generally around 20 times higher, which is promising.
Cinda Securities believes that the electricity sector is expected to see improved profits and a revaluation of values. Under the tense situation of electricity supply and demand, the peak value of coal and electricity is highlighted. The construction of new power systems under the dual carbon target may continue to rely on the abundance and investment of system regulation methods. Looking ahead, the agency believes power operators' performance is expected to improve significantly.
Related concept stocks:
China Resources Power (00836): On January 19, China Resources Power announced on the Hong Kong Stock Exchange that in 2023, the cumulative sales volume of subsidiary power plants reached 193 million megawatt-hours, an increase of 4.7% over the previous year. Among them, the cumulative sales volume of attached wind farms reached 39.61 million megawatt-hours, an increase of 12.4% over the previous year; the cumulative sales volume of attached photovoltaic power plants reached 2.86 million megawatt-hours, an increase of 111.8% over the previous year.
Huadian International Power Co., Ltd. (01071): At the end of 2023, Guotai Junan released a research report stating that considering that Huadian International Electric Power (01071) coal power operations are stabilizing and equity installed capacity is expected to continue to grow, the company raised EPS belonging to common shareholders from 2023 to 2025 to 0.57/0.64/0.71 yuan (original value 0.52/0.61/0.65 yuan). The current stock price is 5.5 times PE (2023E). Maintain the target price of HK$5.30 and maintain the “Overweight” rating.
Datang New Energy (01798): Recently, it was announced that as of December 31, 2023, the Group has completed a cumulative total of 30.088 million megawatt-hours of power generation in 2023, an increase of 9.80% over 2022. Among them, completed wind power generation was 29.185,400 megawatt-hours, an increase of 7.44% year-on-year over 2022; photovoltaic power generation was 2,422,400 megawatt-hours, an increase of 49.22% over 2022.
Huaneng International Power Co., Ltd. (00902): According to the company's preliminary statistics, in the fourth quarter of 2023, each of the company's operating power plants in China completed feed-in capacity of 110.476 billion kilowatt-hours according to the consolidated statement caliber, an increase of 5.18%; throughout 2023, the company's operating power plants in China completed a total of 447.856 billion kilowatt-hours of feed-in electricity according to the consolidated statement caliber, an increase of 5.33%; the average online settlement price of the company's operating power plants in China was 508.74 yuan/megawatt-hour, a year-on-year decrease of 0.23%. In 2023, the proportion of the company's market-based electricity transactions was 88.40%, the same as the previous year.