中国火电与水电：冰火对决.docx

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1、29October2018THISCONTENTMAYNOTBEDISTRIBUTEDTOTHEPEOPLE'SREPUBLICOFCHINA(THE"PRC")(EXCLUDINGSPECIALADMINISTRATIVEREGIONSOFHONGKONGANDMACAO)abcChinaEQUITIESELECTRICUTILITIESFireversusiceChinaCoal&HydroPower4Weremaincautiousoncoalpowerduetoslowingutilisationgrowth,potentialtariffdow

2、nsideandresilienthighcoalprices4CoalIPPs:WestilllikeCRP(Buy)foritsdiversifiedportfolio;HuanengandHuadian(H/A–Hold/Reduce)lookconcerning4Hydropowerprovidesmoredefensivegrowth.ResumingcoveragewithBuyonCYPandChuantouandHoldonSDICWhatdoweseeahead?Coal-firedIPPsreportedstrongearningsgr

3、owthin1H18,butweseeaslowdownfrom2H18,aspowerdemand/supplyturnslessfavourableinChina,leadingtoslowerutilisationgrowth.Inadditiontothegovernment’sagendatocapenergypricesasaformofeconomicstimulus,bothbenchmarkandmarket-basedtariffsforcoal-firedunitsmayfacedownsiderisk.Cost-wise,HSBCf

4、orecastscoalpricesinChinatostayhighatRMB660/ton(+3%y-o-y)in2018e,buttoretreattoRMB620/ton(-6%y-o-y)in2019e.Coalpricesmayfallnextyearbutthiscouldbeduetofurtherweaknessinutilisationandmarket-basedtariffsonpoweroversupply.Inaddition,theultimatebenefitsofapotentialfallincoalpricescoul

5、dturnouttobelessthanexpectedasmostprocurementislockedinbycontracts.Hydropower,ontheotherhand,sawasteadyperformanceincorehydroassetsduring1H18,whenpoweroutputinChinagrew3%.AveragerainfallandprecipitationinChinaincreased5%y-o-yoverJuly-September2018,leadingtobetterhydrooutputin3Q18(

6、8%y-o-y)andlikelyin2H18shouldthissituationpersist.RemaincautiousoncoalIPPs.Afterastrong1H18,coalIPPs’sharepriceshavefallen15-30%inthepastthreemonths(HSI:-12%)asthemarkethasturnedlesspositive.ButwethinktheStreetisstilloverestimatingcoalIPPs’earningsrecoverythisyear(ourEPSestimatesa

7、re10-28%belowconsensus)asweseemoredownsideinutilisationandtariffsahead;HNPhasthehighestearningssensitivity.Hydropowerismoredefensive.LargehydropowerunitsinChinaenjoysteadyoperationsandaresubjecttolessdownsiderisksfromcompetitionandmarketreforms,thankstotheirscale,operationaleffici

8、encyandcostadvantageversusotherfu