德银-中国-公用事业行业-关税提高前的情绪改善

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1、ChinaIPPsDeutscheBankMarketsResearchAsiaIndustryDateChina16October2017ChinaIPPsUtilitiesUtilitiesIndustryUpdateSentimenttoimproveaheadoftariffhikeMichaelTong,CFAYear-endpowertariffhike>95%probabilityResearchAnalystAshistorysuggests,ChinaIPPsstockstendtooutp

2、erformaheadoftariffhikewhichwesee>95%chancetohappenatend-2017.Besidesthefulljustification+852-22036167aspertriggeringtermssetinthefueltariffpass-throughmechanism,severalLukaZhukeyfactorsunderpinourhighconviction:1)abenigninflationenvironmentwithResearchAnalys

3、tCPI<2%,2)avastlyimprovedcorporateROEindicatingend-users'capability+852-22036173toabsorbafirst-timetariffhikesinceDec-2011,3)anexpandednon-regulatedend-userbasetonearly30%totalpowerusage,4)possiblemitigationthroughHanyuZhangreductioninotherend-usertariffelem

4、ents,5)alesssevereovercapacitythankstoResearchAnalyststrongdemandandeffectivesupplysidereform.AfterunderperformingHSCEIby+852-2203620745%/15%/16%overthelast24m/12m/YTDperiods,ChinaIPPspresentawindowofsectorrotationbetweennowandyear-end.HuanengandHuadianare

5、mostleveragedtoatariffhikeahead.MarketskeptismontariffhikeAkintoFedratehikeprobabilitybyconsensusfluctuatingonindicatorslikeCPI,GDPandnon-farmpayroll,powertariffhikeinChinacouldalsobeassessedwithprobabilityrelatedtoafewmacrofactorsotherthanthedecisivecoalpric

6、emovementinprinciple.Inthepast,theimplementationoffuel-tariffpass-throughmechanismhasbeenmixedandintervenedbypoliticalconsiderations,inparticularinflationsituationanddownstreamfinancialconditions.ButeconomyrecoveryisnowinfullswingwithmodestinflationWefeelnone

7、edtojustifyatariffhikefromtheperspectiveofsurgingcoalpriceandcreditworthinessofgovernment’stariffpolicy.Rather,welookatpastscenarioswhentariffhikedidnotcomeasexpected.Firstwasthesevereinflationperiodof2010-11whichledtofrozenpowertariffuntilDec-2011whenmonthlyC

8、PIdroppedbelow5%.Secondwasthestillfragileeconomyinlate2016whentariffwasunchangedatyear-endalthoughNDRCexplainedwithmodestaveragecoalpricechangeunderdefinedpolicytimeframe(Nov'15-Oct'16).Now,inflationisundercontrolandco