HSBC Research: The Mainland Power Industry Enters a "Momentum Stagnation Period"

HSBC Research released a latest report, pointing out that the Chinese power industry will face challenges of slowing growth momentum in the first year of the 14th Five-Year Plan. The report believes that under the influence of multiple factors such as the downward expectation of electricity prices, the slowdown in the speed of new installed capacity, and a stabilizing policy environment, the overall growth momentum of the industry will significantly weaken. HSBC downgraded the rating of Huaneng Power International (00902.HK) from "Hold" to "Reduce," while also downgrading the rating of China Resources Power (00836.HK) from "Buy" to "Hold." The bank pointed out that traditional thermal power generation companies may face double-digit declines in profitability due to the dual impact of pressure on electricity prices and weak utilization hours, while the market has not yet fully reflected this risk.

The bank is optimistic about Longyuan Power (00916.HK), expecting its profit growth to lead the industry, with the key being the actual performance of wind resources; China Power (02380.HK) is expected to have the highest yield attractiveness among peers with a projected dividend yield of 5.8% for the fiscal year 2026; Yangtze Power (600900.SH) is expected to have a dividend yield of about 3.7% for the fiscal year 2026 due to its resilient electricity price outlook. All three stocks received a "Buy" rating.

HSBC Research pointed out that power stocks have continued to underperform the market over the past year, mainly due to market funds flowing towards sectors with greater growth potential and technology themes. In the face of a weak industry profit outlook for 2026 and limited policy catalysts, the industry may continue to underperform the market this year