Utilities Sector Weekly Tracker: Undervalued Thermal Power & The Global Expansion of EV Charging and PV Assets

Date: October 20, 2025
Analyst: Yuan Li (S0600511080001), Tang Yahui (S0600520070005)
Rating: Overweight (Maintained)
Sector: Public Utilities / Energy Infrastructure

Executive Summary

This week’s analysis of the Chinese utilities sector highlights a divergence in performance drivers, characterized by robust earnings recovery in thermal power and significant policy tailwinds for electric vehicle (EV) charging infrastructure and renewable energy exports. We maintain an Overweight rating on the sector, emphasizing a dual-strategy approach: capitalizing on the undervalued earnings potential of thermal power generators amidst stabilizing coal prices, and positioning for long-term growth in EV charging infrastructure and photovoltaic (PV) asset internationalization.

Key Developments:
1. Thermal Power Earnings Surge: Jiantou Energy’s Q3 2025 preliminary results serve as a bellwether for the sector, with net profit attributable to shareholders jumping 566% year-over-year (YoY) in Q3 alone. This performance underscores the operational leverage gained from the combination of peak summer demand and declining coal costs.
2. Policy Catalyst for EV Charging: The National Development and Reform Commission (NDRC) released the "Three-Year Action Plan for Doubling Electric Vehicle Charging Facility Service Capacity (2025–2027)." The mandate targets the construction of 28 million charging facilities by end-2027, including 40,000 high-power (>60kW) super-fast charging guns in highway service areas. This creates a definitive roadmap for infrastructure capex and equipment demand.
3. Renewable Consumption Mandates: The NDRC’s draft implementation measures for minimum renewable energy consumption ratios introduce mechanisms for green power direct connection, green certificate trading, and non-electric applications (heating, hydrogen, ammonia/methanol). This structural shift enhances the monetization potential of green assets.

Market Performance:
During the week of October 13–17, 2025, the Shenwan (SW) Public Utilities Index declined by 0.69%, significantly outperforming the ChiNext Index. Sub-sector performance was mixed: Hydropower (+1.69%) and Nuclear Power (CGN Power +2.92%) showed resilience, while Solar PV (-5.09%) and Wind Power (-2.63%) faced headwinds. Thermal Power declined modestly by 0.82%. Notably, individual stocks such as Jiantou Energy (+16.7%) and Guoxin Energy (+28.6%) demonstrated strong momentum, driven by earnings surprises and regional gas market dynamics, respectively.

Investment Thesis:
We advocate for a barbell strategy. On one end, we recommend thermal power companies in the Beijing-Tianjin-Hebei region (e.g., Jiantou Energy, Jingneng Power, Datang Power) due to their attractive valuation multiples and improving profit margins. On the other end, we highlight opportunities in EV charging equipment (TGOOD, Shenghong Shares) and asset-heavy renewable/charging platforms (Nanwang Energy, Longshine Technology) that stand to benefit from Real World Asset (RWA) tokenization trends and electricity spot market reforms. Additionally, we maintain positive views on Hydropower (Yangtze Power) for its cash flow stability, Nuclear Power (China National Nuclear Power, CGN Power) for its deterministic growth pipeline, and Green Power operators as historical subsidy arrears are resolved through debt resolution initiatives.

Key Takeaways

1. Thermal Power: Earnings Inflection Point and Valuation Reset

The thermal power sector is experiencing a profound fundamental improvement, driven by the decoupling of revenue growth from fuel cost inflation. The core investment logic rests on three pillars: capacity payments, declining coal prices, and stable utilization hours.

1.1. Jiantou Energy: A Case Study in Operational Leverage

Jiantou Energy’s preliminary results for the first three quarters of 2025 provide compelling evidence of the sector’s turnaround.
* Financial Performance: The company reported an estimated net profit attributable to shareholders of RMB 1.583 billion for 9M 2025, representing a 232% YoY increase. More strikingly, Q3 2025 single-quarter net profit reached RMB 686 million, a 566% YoY surge.
* Drivers: This exceptional growth is attributed to two primary factors:
1. Peak Summer Demand: The "peak summer" season drove higher utilization hours and electricity sales volumes.
2. Coal Price Decline: The sustained downward trend in thermal coal prices has significantly reduced fuel costs, expanding gross margins.
* Implication: Jiantou’s performance is not an isolated incident but indicative of broader industry trends. Investors should view thermal power stocks not merely as defensive yield plays but as cyclical growth assets benefiting from margin expansion.

1.2. Coal Price Dynamics: Stabilization at Lower Levels

Fuel cost remains the most critical variable for thermal power profitability. Recent data indicates a favorable environment for generators.
* Current Pricing: As of October 17, 2025, the port-side price for 5,500 kcal thermal coal in Qinhuangdao stood at RMB 748/ton.
* Weekly Change: +RMB 39/ton (a modest weekly uptick, likely seasonal or logistical).
* Year-on-Year Change: -10.95%.
* Monthly Average: The August 2025 average price was RMB 688/ton, down RMB 152/ton (-18%) compared to August 2024.
* Outlook: While weekly fluctuations occur, the YoY decline of nearly 11% provides a substantial cost buffer for thermal power plants. The stabilization of coal prices below the RMB 800/ton psychological threshold supports sustained profitability improvements for Q3 and Q4 2025.

1.3. Capacity and Utilization Trends

• Installed Capacity: As of June 30, 2025, China’s total thermal power installed capacity reached 1.47 billion kW, a 4.7% YoY increase.
• New Additions: In 1H 2025, new thermal power capacity additions totaled 25.78 GW, a significant 41.3% YoY increase. This suggests that despite the green transition, thermal power remains essential for grid stability and peak load management.
• Utilization Hours: For the full year 2024, thermal power utilization hours were 4,400 hours, a decrease of 76 hours YoY. However, the slight dip in utilization is more than offset by the margin expansion from lower coal costs and the introduction of capacity compensation mechanisms in various provinces.

Investment Recommendation: We recommend focusing on thermal power assets in the Beijing-Tianjin-Hebei (Jing-Jin-Ji) region, where electricity demand is robust and heating requirements provide additional revenue streams.
* Top Picks: Jiantou Energy, Jingneng Power, Datang Power.

2. EV Charging Infrastructure: Policy-Driven Supercycle

The release of the NDRC’s "Three-Year Action Plan for Doubling Electric Vehicle Charging Facility Service Capacity (2025–2027)" marks a pivotal moment for the charging infrastructure sector. This policy shifts the narrative from organic, market-led growth to a state-mandated infrastructure build-out, de-risking investment timelines and volume expectations.

2.1. Policy Targets and Specifications

The Action Plan sets clear, quantifiable goals for the next three years:
* Total Facilities: By the end of 2027, 28 million charging facilities will be built nationwide. This represents a massive scaling of the current network, addressing range anxiety and supporting the continued adoption of New Energy Vehicles (NEVs).
* High-Power Charging: A specific focus is placed on high-speed infrastructure. The plan mandates the construction or renovation of 40,000 charging guns with power ratings above 60 kW in highway service areas (including parking zones) by end-2027.
* "Super-Fast Combination": The emphasis on >60kW guns in highway corridors indicates a strategic push towards reducing charging time for long-distance travel, aligning with the technical capabilities of newer EV models (800V platforms).

2.2. Investment Implications

• Equipment Manufacturers: The mandate for high-power charging units favors manufacturers with advanced technology in liquid-cooled charging modules and high-voltage compatibility. Companies with strong R&D in super-fast charging solutions will capture disproportionate value.
• Infrastructure Operators: The scale-up requires significant capital expenditure. Operators with strong balance sheets and access to low-cost financing will lead the consolidation of the market.
• Export Opportunities: The report highlights "charging pile going global" as a key theme. Chinese charging equipment manufacturers are increasingly competitive globally due to cost advantages and technological maturity. The domestic policy boost strengthens their supply chain scale, further enhancing export competitiveness.

Investment Recommendation: Focus on leading equipment suppliers and integrated operators.
* Top Picks: TGOOD (Te Rui De), Shenghong Shares.

3. Renewable Energy: Policy Frameworks and Asset Revaluation

The renewable energy sector is undergoing a structural transformation driven by two major policy developments: the resolution of historical subsidy arrears and the new framework for renewable consumption mandates.

3.1. Renewable Consumption Mandates

The NDRC’s draft "Implementation Measures for Minimum Renewable Energy Consumption Ratio Targets and Renewable Energy Power Consumption Responsibility Weight System" introduces flexible compliance mechanisms:
* Electricity Consumption: Entities can meet targets through self-generation, direct green power purchases, or Green Certificate (GC) trading.
* Non-Electric Consumption: The policy explicitly recognizes non-electric uses of renewables, such as heating, cooling, and the production of hydrogen, ammonia, and methanol. This broadens the addressable market for renewable energy beyond the grid, creating new revenue streams for green hydrogen and green chemical projects.

3.2. Resolution of Subsidy Arrears

A critical overhang for green power operators has been the accumulation of unpaid subsidies from previous years. The report notes that debt resolution initiatives and increased fiscal support are expected to address these historical issues.
* Impact: The clearance of subsidy receivables will significantly improve the cash flow positions of green power operators, allowing for reinvestment in new projects or increased dividend payouts.
* Asset Quality: With the resolution of legacy issues, the asset quality of green power companies is bottoming out and showing signs of improvement. The growth trajectory of the sector is once again becoming clearly visible, unhindered by balance sheet constraints.

3.3. Asset Revaluation via RWA and Spot Markets

The report highlights a emerging theme: the revaluation of PV and charging assets through Real World Assets (RWA) tokenization and integration into electricity spot markets.
* Spot Market Integration: As more renewable assets participate in spot markets, their value becomes linked to real-time supply and demand dynamics rather than fixed feed-in tariffs. This rewards flexible and well-sited assets.
* RWA Potential: The financialization of infrastructure assets (via REITs or digital tokens) can unlock liquidity and attract a broader base of institutional investors, potentially lowering the cost of capital for these projects.

Investment Recommendation: Look for companies with strong asset portfolios and exposure to green trading mechanisms.
* Top Picks: Nanwang Energy, Longshine Group.
* Green Power Operators: Longyuan Power (H), Zhongmin Energy, Three Gorges Energy, Longjing Environmental Protection.

4. Hydropower: Resilience and Cash Flow Stability

Hydropower remains a cornerstone of the utilities portfolio, offering defensive characteristics combined with upside potential from market-based pricing reforms.

4.1. Hydrological Conditions: Three Gorges Update

Water availability is the primary driver of hydropower generation. Recent data from the Three Gorges Reservoir indicates normal operating conditions with improved inflow trends.
* Water Level: As of October 17, 2025, the water level at the Three Gorges station was 170.55 meters.
* Historical Context: This compares to 173m (2021), 158m (2022), 175m (2023), and 164m (2024) for the same period. The current level is within the normal range, indicating adequate storage for winter generation.
* Flow Rates:
* Inflow: 16,000 cubic meters/second, up 48.15% YoY.
* Outflow: 14,600 cubic meters/second, up 102.78% YoY.
* Interpretation: The significant YoY increase in both inflow and outflow suggests a recovery from the low-water conditions experienced in prior years (particularly 2022). This normalization supports stable generation output for major hydropower operators.

4.2. Capacity and Utilization

• Installed Capacity: As of June 30, 2025, China’s hydropower installed capacity reached 440 million kW, a 3.0% YoY increase.
• New Additions: 1H 2025 saw new hydropower capacity additions of 3.93 GW, a 21.2% YoY decrease. This reflects the maturation of large-scale hydro projects and the shifting focus to pumped storage and smaller run-of-river projects.
• Utilization Hours: In 2024, hydropower utilization hours were 3,349 hours, an increase of 219 hours YoY. This improvement in efficiency directly translates to higher revenue per unit of installed capacity.

4.3. Investment Logic: Volume and Price Growth

• Cost Advantage: Hydropower has the lowest levelized cost of electricity (LCOE) among all power sources.
• Market Pricing: Provincial market electricity prices for hydropower are rising. Furthermore, inter-provincial transmission allows hydropower producers to capture higher prices in receiving provinces.
• Cash Flow & Dividends: With strong cash flows and many major assets approaching the end of their depreciation periods, profitability is being released directly to the bottom line. This supports robust dividend policies, making hydropower stocks attractive for income-focused investors.

Investment Recommendation:
* Top Pick: Yangtze Power. Its scale, low cost, and consistent dividend history make it a core holding.

5. Nuclear Power: Deterministic Growth and ROE Expansion

Nuclear power is experiencing a renaissance in China, characterized by accelerated approval rates and a clear path to profitability enhancement.

5.1. Approval Acceleration

The government’s commitment to "safe, active, and orderly development" of nuclear power is evident in the recent approval trends.
* 2024 Approvals: In August 2024, the State Council approved 11 new nuclear units, including the Xuwei Phase I project in Jiangsu.
* Historical Trend: Since the restart of approvals in 2019, the annual number of approved units has been: 6 (2019), 4 (2020), 5 (2021), 10 (2022), 10 (2023), and 11 (2024).
* Cumulative Share (2019-2024): Out of 46 approved units:
* China National Nuclear Power (CNNP): 18 units (39%)
* CGN Power: 16 units (35%)
* SPIC (State Power Investment Corp): 8 units (17%)
* Huaneng Group: 4 units (9%)
* Implication: The consistent double-digit annual approvals provide a visible pipeline for revenue growth for the next decade. CNNP and CGN Power are the primary beneficiaries.

5.2. Financial Metrics and Outlook

• Installed Capacity: As of June 30, 2025, nuclear installed capacity was 61 million kW, up 4.9% YoY. No new capacity was added in 1H 2025, as projects are still under construction.
• Utilization Hours: In 2024, nuclear utilization hours were 7,683 hours, up 13 hours YoY. Nuclear plants operate at baseload with extremely high capacity factors.
• ROE and Dividend Trajectory:
  • Capex Peak: Capital expenditure is peaking as multiple units come online.
  • ROE Expansion: As new units commence commercial operation, Return on Equity (ROE) is expected to double, converging with the levels of mature projects.
  • Dividend Growth: Improved cash flows and stabilized capex requirements will support synchronous increases in dividend payouts.

Investment Recommendation: Nuclear power offers a rare combination of growth visibility and income stability.
* Top Picks: China National Nuclear Power (CNNP), CGN Power.
* Watch List: CGN Power (H).

6. Wind and Solar: Rapid Capacity Expansion Amidst Utilization Pressure

The renewable energy sector continues to expand at a breathtaking pace, though this growth brings challenges in terms of grid integration and utilization efficiency.

6.1. Capacity Additions (1H 2025)

• Wind Power:
  • Cumulative Capacity: 570 million kW (+23% YoY).
  • New Additions: 51.39 GW in 1H 2025, a 99% YoY increase.
• Solar PV:
  • Cumulative Capacity: 1.1 billion kW (+54% YoY).
  • New Additions: 212.21 GW in 1H 2025, a 107% YoY increase.
• Analysis: The doubling of annual installation rates for both wind and solar underscores China’s aggressive decarbonization targets. However, such rapid addition strains grid absorption capabilities.

6.2. Utilization Hours (2024 Full Year)

• Wind: 2,127 hours, a decrease of 107 hours YoY.
• Solar: 1,211 hours, flat YoY.
• Implication: The decline in wind utilization hours highlights the issue of curtailment and resource variability. As penetration increases, the value of flexibility (storage, demand response) becomes paramount. Investors should favor companies with integrated storage solutions or those located in regions with better grid connectivity.

Industry Core Data Tracking

To provide a comprehensive view of the sector’s health, we track key operational and financial metrics across electricity consumption, generation, pricing, and fuel costs.

1. Electricity Consumption: Recovery and Structural Shifts

Total societal electricity consumption is a proxy for economic activity. The data for January–July 2025 indicates a steady recovery in demand.

Analysis:
* Acceleration: The overall growth rate accelerated by 0.8 percentage points compared to the first half of the year, suggesting strengthening economic momentum in the third quarter.
* Sectoral Drivers: The Primary Industry (agriculture, etc.) shows the strongest growth (+10.8%), possibly driven by electrification of agricultural processes. The Tertiary Industry (services) also grew robustly (+7.8%), reflecting the continued recovery in consumer-facing sectors. Secondary Industry (manufacturing) growth remains moderate (+2.8%), indicating a gradual rather than explosive industrial recovery.

2. Electricity Generation: Mix Shift Towards Renewables

While consumption grew by 4.5%, total generation grew by only 1.3%, indicating a drawdown in inventory or increased imports/transmission efficiency, but more importantly, a significant shift in the generation mix.

Analysis:
* Thermal & Hydro Decline: Both thermal and hydro generation contracted YoY. The decline in thermal power (-1.3%) is less severe than in H1 (-3.1%), suggesting a stabilization. The deeper decline in hydro (-4.5%) reflects the lingering effects of variable water conditions, although recent data suggests improvement.
* Renewable Surge: Solar PV continues to lead growth at +22.7%, followed by Wind (+10.4%) and Nuclear (+10.8%). These sources are absorbing the incremental demand and replacing fossil fuel generation.
* Implication: The grid is successfully integrating higher shares of renewables, but the displacement of thermal power highlights the need for thermal plants to shift from baseload to peaking/flexibility roles, reinforcing the value of capacity payments.

3. Electricity Pricing: Grid Agency Purchase Prices

Electricity prices remain a critical determinant of utility revenues. We track the grid agency purchase prices, which serve as a benchmark for regulated and semi-regulated transactions.

• August 2025 Average Price: RMB 388/MWh.
• YoY Change: -2%.
• MoM Change: +1.3%.

Regional Price Variations (August 2025):
Prices vary significantly by province due to local supply-demand balances, fuel mixes, and transmission constraints.

Analysis:
* National Average: The slight YoY decline (-2%) reflects the overall downward pressure from increased renewable supply. However, the MoM increase (+1.3%) in August suggests seasonal strength during peak summer demand.
* Volatility: Provinces like Sichuan and Yunnan show high volatility due to their reliance on hydropower. Sichuan’s price jumped from RMB 202/MWh in July to RMB 277/MWh in August, highlighting the impact of water availability on local pricing.
* Spread Opportunities: The wide disparity between high-price regions (Guangdong, Shanghai ~500 RMB/MWh) and low-price regions (Yunnan, Qinghai ~270 RMB/MWh) creates arbitrage opportunities for inter-provincial transmission and trading companies.

4. Coal Prices: Cost Side Monitoring

As detailed in Section 1.2, coal prices are the primary cost driver for thermal power.

• Qinhuangdao 5,500 kcal Spot Price (Oct 17, 2025): RMB 748/ton.
• Trend: While the weekly increase of RMB 39/ton warrants monitoring, the YoY decline of ~11% confirms a structurally lower cost environment for thermal generators compared to the 2022-2023 peak.

5. Water Conditions: Three Gorges Reservoir

• Water Level (Oct 17, 2025): 170.55 meters.
• Inflow: 16,000 $m^3/s$ (+48.15% YoY).
• Outflow: 14,600 $m^3/s$ (+102.78% YoY).
• Assessment: Normal蓄水 (storage) levels and improved inflows support positive generation outlooks for Q4 2025 and Q1 2026.

Corporate Announcements and Events

Several significant corporate events occurred during the reporting period, ranging from earnings releases to strategic investments and governance changes. These events provide micro-level insights into company-specific strategies and risks.

1. Earnings and Financial Updates

Jiantou Energy (000600.SZ):
* Event: Preliminary Q3 2025 Results.
* Details: Net profit for 9M 2025 estimated at RMB 1.583 billion (+232% YoY). Q3 single-quarter net profit estimated at RMB 686 million (+566% YoY).
* Significance: Confirms the strong earnings recovery thesis for thermal power.

Foshan Gas (002911.SZ):
* Event: Q3 2025 Report Release.
* Financials:
* Q3 Revenue: RMB 8.164 billion (-0.16% YoY).
* Q3 Net Profit: RMB 181 million (+4.07% YoY).
* 9M Revenue: RMB 23.501 billion (+5.38% YoY), driven by supply chain business expansion.
* 9M Net Profit: RMB 490 million (+6.07% YoY).
* Operating Cash Flow: RMB 524 million (-57.74% YoY), due to increased inventory from business expansion.
* Strategic Move: Announced a complex related-party transaction to invest in a 200,000 ton/year Green Methanol Project in Sanshui District, Foshan.
* Structure: Foshan Gas injects RMB 310 million into its subsidiary, which then acquires and injects capital into a joint venture (VENEX Holding) with Hong Kong and China Gas (Towngas).
* Investment: Total project investment ~RMB 2.058 billion. Expected annual after-tax profit ~RMB 270 million. Payback period: 6.98 years.
* Significance: Demonstrates a strategic pivot towards green fuels and chemicals, aligning with national carbon neutrality goals.

Tianhao Energy (300332.SZ):
* Event: Convertible Bond Conversion Update.
* Details: In Q3 2025, only 20 bonds (RMB 2,000 face value) were converted into 400 shares. Remaining bond balance: RMB 342.28 million (80.92% unconverted).
* Significance: Low conversion activity suggests the stock price may be below the conversion price incentive threshold, or investors prefer holding the debt instrument.

2. Strategic Investments and M&A

ENN Natural Gas (600803.SH):
* Event: Share Pledge Updates.
* Details: Controlling shareholder ENN International released 13 million shares from pledge. Shareholder ENN Holdings released 33 million shares but pledged 98.45 million shares. Shareholder ENN Tech pledged 47.56 million shares to Huatai Securities.
* Aggregate Pledge: ENN International and concerted parties hold 72.44% of shares, with 11.94% of total shares pledged.
* Significance: While pledge levels are monitored, the funds are cited for production and operations. No immediate control risk, but investors should monitor pledge ratios.

Zhuhai Port (000507.SZ):
* Event: Guarantee for Subsidiary Loan.
* Details: Provided full joint liability guarantee for an RMB 83.22 million M&A loan taken by its subsidiary Zhuhai Gangchao New Energy from Bank of Jiangsu.
* Significance: Supports the subsidiary’s acquisition activities, expanding Zhuhai Port’s presence in the new energy sector.

Hongtong Gas (605169.SH):
* Event: Stock Trading Abnormal Fluctuation.
* Details: Stock price rose >20% over three days. Company confirmed normal operations and no undisclosed major events. Noted that a share repurchase program was completed in March 2025, and a shareholder reduction plan (announced Sept 16) had not been executed as of Oct 14.
* Significance: Highlights market speculation in the gas sector. Investors should be cautious of volatility unrelated to fundamentals.

Guoxin Energy (600617.SH):
* Event: Stock Trading Abnormal Fluctuation.
* Details: A-share price rose >20% over two days. Company confirmed normal operations and no undisclosed events.
* Significance: Similar to Hongtong, this reflects sector-wide momentum, possibly driven by winter heating expectations or gas price reforms.

3. Governance and Regulatory Changes

CGN Power (1816.HK / 003816.SZ):
* Event: Shareholder Meetings and Governance Restructuring.
* Details:
* Approved the abolition of the Supervisory Board, transferring its duties to the Audit and Risk Management Committee of the Board of Directors.
* Amendments to Articles of Association and Rules of Procedure were passed by A-shareholders (>99% approval) but failed to pass the H-share class meeting (requires 2/3 majority, received ~62%).
* Significance: The failure of the H-share class resolution does not affect daily operations but highlights differing governance preferences between A and H shareholders. The move towards a single-tier board structure aligns with modern corporate governance trends but requires careful navigation of cross-listing regulations.

Changyuan Power (000966.SZ):
* Event: Adjustment of Related-Party Transactions.
* Details: Increased estimated 2025 related-party transaction total with Guoneng Longyuan Environmental Protection by RMB 498 million to RMB 1.216 billion.
* Reason: Adjustment in settlement mode for desulfurization and denitrification franchise/operation services.
* Breakdown: Increase in "accepting labor" services (payment for environmental benefits) by RMB 474 million.
* Significance: Reflects operational adjustments in environmental compliance costs. The transaction is deemed fair and helps alleviate capital pressure.

Jinkong Power (000767.SZ):
* Event: Shareholder Reduction.
* Details: Zhongtou Zhibenhui (Beijing) Asset Management reduced its holding by 20.996 million shares (0.68%) via block trade. Its stake fell below 5% (to 4.99%), meaning it is no longer a major shareholder subject to certain disclosure rules.
* Significance: Removal of a large overhang on the stock. The shareholder has no plans to increase holdings in the next 12 months and may continue to reduce.

Qianyuan Power (002039.SZ):
* Event: Completion of Share Increase by Controlling Shareholder.
* Details: Huadian Chanrong (subsidiary of China Huadian) completed its planned increase, acquiring 6.1165 million shares (1.43% of total). Total holding by China Huadian and concerted parties increased to 29.72%.
* Significance: Strong signal of confidence from the controlling state-owned enterprise (SOE) in the company’s future prospects.

Shaoneng Shares (000601.SZ):
* Event: Pre-disclosure of Share Reduction.
* Details: Major shareholder Shenzhen Zhaowei Hengfa Energy plans to reduce its holding by up to 31.44 million shares (3.00% of adjusted capital) via block trade and centralized bidding between Nov 10, 2025, and Feb 9, 2026.
* Significance: Potential selling pressure in the coming months. Investors should monitor the execution of this plan.

Teres Energy Equipment (920014.BJ):
* Event: Cancellation of Repurchased Shares.
* Details: Cancelled 746,281 repurchased shares. Total share capital reduced to 123,701,907.
* Significance: Standard capital management procedure, slightly increasing earnings per share (EPS) by reducing the share count.

Risks / Headwinds

While the sector outlook is positive, investors must remain cognizant of several key risks that could impact performance.

1. Electricity Demand Growth Below Expectations

• Risk: If macroeconomic recovery stalls or industrial activity slows, electricity demand growth could fall below the projected 4-5% range.
• Impact: Lower demand would lead to reduced utilization hours for all power generators, particularly affecting thermal and hydropower plants that rely on volume for revenue. It could also exacerbate curtailment issues for wind and solar.

2. Electricity Price Volatility

• Risk: As more electricity is traded in spot markets, prices become more volatile. While peak prices may rise, off-peak prices could fall significantly, especially in regions with high renewable penetration (e.g., Shandong, Gansu).
• Impact: Generators without flexible assets or hedging strategies may see margin compression. Negative pricing events, though rare, pose a theoretical risk in highly saturated renewable zones.

3. Coal Price Fluctuations

• Risk: Although coal prices have declined YoY, they remain subject to geopolitical shocks, supply chain disruptions, and seasonal demand spikes. A sudden spike in coal prices above RMB 1,000/ton would severely erode thermal power margins.
• Impact: Direct impact on the cost of goods sold (COGS) for thermal power companies. Given the thin margins in some periods, even a 10% increase in coal prices can wipe out quarterly profits.

4. Hydrological Uncertainty

• Risk: Hydropower generation is inherently dependent on rainfall and snowmelt. Climate change increases the frequency of extreme weather events, including droughts and floods.
• Impact: A repeat of the 2022 drought scenario would lead to significant generation shortfalls for hydropower companies like Yangtze Power and SDIC Power, forcing greater reliance on expensive thermal power and impacting overall grid stability.

5. Policy and Regulatory Changes

• Risk: Changes in subsidy policies, green certificate trading rules, or capacity payment mechanisms could alter the revenue model for renewable and thermal assets.
• Impact: Uncertainty in policy implementation (e.g., the final details of the renewable consumption mandate) may delay investment decisions or affect asset valuations.

6. Interest Rate and Financing Costs

• Risk: Utilities are capital-intensive industries. Rising interest rates or tighter credit conditions could increase the cost of debt financing for new projects (especially nuclear, wind, and solar).
• Impact: Higher finance costs reduce net income and may slow down the pace of capacity expansion.

Rating / Sector Outlook

Sector Rating: Overweight (Maintained)

We maintain our Overweight rating on the Chinese Utilities sector. The sector offers a compelling mix of defensive stability (hydropower, nuclear) and cyclical upside (thermal power recovery, renewable growth). The policy environment is supportive, with clear mandates for infrastructure build-out (EV charging) and renewable consumption.

Sub-Sector Ratings:

Investment Horizon: 6-12 Months.

Investment View

Our investment strategy for the coming quarter is structured around three core themes: Value Recovery, Policy-Driven Growth, and Structural Transformation.

1. Theme 1: Value Recovery in Thermal Power

Logic: Thermal power is no longer just a "dirty" legacy asset but a critical flexibility provider. The market has not fully priced in the sustainability of margin improvements driven by lower coal costs and the nascent capacity payment mechanisms.
Action: Buy undervalued thermal power generators with strong regional positions.
Top Picks:
* Jiantou Energy (000600.SZ): Direct beneficiary of Jing-Jin-Ji demand and coal price decline. Q3 earnings surprise confirms the thesis.
* Jingneng Power (600578.SH): Strong presence in Beijing, benefiting from heating demand and stable industrial load.
* Datang Power (601991.SH): Large-scale operator with significant elasticity to coal price movements.

2. Theme 2: Policy-Driven Growth in EV Charging and Green Infrastructure

Logic: The NDRC’s "Three-Year Action Plan" provides a clear visibility on volume growth for charging infrastructure. This de-risks the investment case for equipment manufacturers and operators. Simultaneously, the push for green methanol and hydrogen creates new avenues for gas and energy companies.
Action: Invest in leading equipment suppliers and companies pivoting to green fuels.
Top Picks:
* TGOOD (300001.SZ): Leading charging equipment manufacturer with strong R&D in high-power charging.
* Shenghong Shares (300693.SZ): Diversified power electronics player with strong charging module business.
* Foshan Gas (002911.SZ): Strategic entry into green methanol production offers a new growth curve beyond traditional gas distribution.

3. Theme 3: Structural Transformation and Asset Revaluation

Logic: The resolution of renewable subsidy arrears and the integration of assets into spot markets/RWA frameworks will unlock value. Hydropower and Nuclear offer stable, growing dividends in a low-interest-rate environment.
Action: Hold high-quality renewable and hydro/nuclear assets for long-term compounding.
Top Picks:
* Yangtze Power (600900.SH): The gold standard for hydropower. Unmatched cash flow stability and dividend consistency.
* China National Nuclear Power (601985.SH) & CGN Power (003816.SZ): Best-in-class nuclear operators with visible growth pipelines and improving ROE.
* Nanwang Energy (003035.SZ) & Longshine Group (300682.SZ): Beneficiaries of asset revaluation through digitalization and market trading.
* Longyuan Power (0916.HK): Leading wind operator; potential upside from subsidy resolution and H-share valuation discount.

Conclusion

The Chinese utilities sector is at an inflection point. The convergence of lower fuel costs, supportive policy mandates, and structural market reforms creates a favorable environment for selective outperformance. Investors should rotate into thermal power for near-term earnings momentum, while maintaining core positions in hydro and nuclear for long-term stability and yield. The EV charging sector offers a high-growth satellite opportunity driven by explicit government targets.

We advise investors to monitor coal price trends, hydrological conditions, and the implementation details of the renewable consumption mandates as key catalysts for the remainder of 2025 and early 2026.

Appendix: Detailed Data Tables and Charts Reference

(Note: The following tables summarize the data presented in the original report's charts section for quick reference.)

Table A1: Monthly Grid Agency Purchase Prices (Jan-Aug 2025) - Selected Provinces (RMB/MWh)

*Note: Yunnan Aug price listed as 208.9 in source table, consistent with July.

Table A2: Cumulative Installed Capacity Growth (1H 2025)

Table A3: Utilization Hours (Full Year 2024)

Disclaimer

This report is prepared by Dongwu Securities Co., Ltd. ("Dongwu Securities") and is intended solely for the use of its clients. Dongwu Securities does not consider any recipient of this report to be a client by virtue of their receipt thereof. Under no circumstances shall the information or opinions expressed in this report constitute an investment recommendation to any person, and Dongwu Securities and its authors shall not be liable for any consequences arising from the use of the contents of this report. Any written or oral promise to share securities investment returns or bear securities investment losses is invalid.

Where legally permitted, Dongwu Securities and its affiliated institutions may hold securities mentioned in this report and engage in transactions, and may also provide investment banking or other services to these companies.

The market involves risks, and investment decisions should be made with caution. This report is based on information that Dongwu Securities analysts believe to be reliable and public. Dongwu Securities strives but does not guarantee the accuracy and completeness of such information, nor does it guarantee that the views or statements herein will not change. At different times, Dongwu Securities may issue reports with data, opinions, and projections inconsistent with those contained in this report.

The copyright of this report belongs to Dongwu Securities. Without written permission, no institution or individual may reproduce, copy, or distribute this report in any form. If authorized to publish or forward this report or its summary, the source must be cited as "Dongwu Securities Research Institute," along with the issuer and date of publication, and the risks of using this report must be highlighted. No citation, deletion, or modification contrary to the original intent of this report is allowed. Unauthorized publication or forwarding of this report shall bear corresponding legal responsibilities. Dongwu Securities reserves the right to pursue legal liability.

Dongwu Securities Investment Rating Standards:

• Company Ratings:

  • Buy: Expected return relative to benchmark > 15% in the next 6 months.
  • Outperform (Add): Expected return relative to benchmark between 5% and 15%.
  • Neutral: Expected return relative to benchmark between -5% and 5%.
  • Underperform (Reduce): Expected return relative to benchmark between -15% and -5%.
  • Sell: Expected return relative to benchmark < -15%.

• Industry Ratings:

  • Overweight (Add): Industry index expected to outperform benchmark by > 5% in the next 6 months.
  • Neutral: Industry index expected to perform within -5% to 5% of benchmark.
  • Underweight (Reduce): Industry index expected to underperform benchmark by > 5%.

Note: Different securities research institutions may use different rating terms and standards. We use a relative rating system. Investors should consider their own specific circumstances, including investment objectives, financial status, and specific needs, and should not regard this report as the sole basis for making investment decisions.

Dongwu Securities Research Institute
No. 5 Xingyang Street, Suzhou Industrial Park
Zip Code: 215021
Fax: (0512) 62938527
Website: http://www.dwzq.com.cn