Key Takeaways:
BofA Securities downgraded HUADIAN POWER (01071.HK) to Underperform and slashed its price target by nearly 19 percent, citing pressure from rising coal costs that offset the benefits of tariff hikes. The firm now expects higher coal prices to weigh on the thermal power producer's profitability.
"The release of FY2025 results by Chinese independent power producers (IPPs) confirmed our concerns regarding declining feed-in tariffs (FITs) and utilization hours," BofA Securities said in a research report. The bank now favors hydropower and nuclear power over wind, solar, and thermal power producers.
The downgrade of Huadian Power was accompanied by a target price reduction to HKD 3.50 from HKD 4.30. BofA also adjusted its views on several other Chinese power sector stocks:
Conversely, the bank reiterated Buy ratings on wind power supply chain companies like ORIENT WIRES & CABLES (603606.SH) and GOLDWIND (02208.HK), citing strong growth in their high-margin export businesses.
The rating changes highlight a significant strategic pivot from BofA, favoring renewable energy sources with more stable cost structures, like hydropower, over thermal power producers who are more exposed to commodity price volatility. Investors will be watching first-quarter results to see if the trend of declining tariffs and rising coal costs continues to pressure thermal IPPs.
This article is for informational purposes only and does not constitute investment advice.
