Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

China Utilities / Thematic (Sector/Industry)

Despite improving power demand, China’s coal-fired independent power producers’, or IPPs’, fourth-quarter profits are set to be hit by surging coal prices. We estimate the operating margins for major coal-fired IPPs will be just around breakeven in the fourth quarter. For 2017, while the government’s confirmation that power tariffs will be unchanged is a little disappointing, we think government’s easing in coal supply restrictions will dampen coal prices, leading to margins recovery for coal-fired IPPs.We have reflected our slightly positive 2017 outlook into our earnings estimates and maintain our fair value estimates of HKD 7.40, HKD 2.54 and HKD 17.00 for <a href="https://www.smartkarma.com/entities/28" target="_blank" data-smartkarma-citation="entities:28:1">Huaneng Power Intl Inc H (902 HK)</a>, <a href="https://www.smartkarma.com/entities/3664" target="_blank" data-smartkarma-citation="entities:3664:1">Datang Intl Power Gen Co H (991 HK)</a>, and <a href="https://www.smartkarma.com/entities/5385" target="_blank" data-smartkarma-citation="entities:5385:1">China Resources Power Holdings Co. Ltd. (836 HK)</a>, respectively, ahead of the full-year earnings results in March.Analysts: Jennifer Song and Lorraine Tan, CFA

Despite improving power demand, China’s coal-fired independent power producers’, or IPPs’, fourth-quarter profits are set to be hit by surging coal prices. We estimate the operating margins for major coal-fired IPPs will be just around breakeven in the fourth quarter. For 2017, while the government’s confirmation that power tariffs will be unchanged is a little disappointing, we think government’s easing in coal supply restrictions will dampen coal prices, leading to margins recovery for coal-fired IPPs.We have reflected our slightly positive 2017 outlook into our earnings estimates and maintain our fair value estimates of HKD 7.40, HKD 2.54 and HKD 17.00 for Huaneng Power Intl Inc H (902 HK), Datang Intl Power Gen Co H (991 HK), and China Resources Power Holdings Co. Ltd. (836 HK), respectively, ahead of the full-year earnings results in March.Analysts: Jennifer Song and Lorraine Tan, CFA

Shenzhen Energy Group Co, Ltd. (000027 CH)

Guangdong Golden Dragon Development (000712 CH)

Haitian Hydropower International (8261 HK)

Shanghai Electric Power Company (600021 CH)

Sichuan Guangan Aaa Public Co, Ltd. (600979 CH)

Yunnan Wenshan Electric Power Co,Ltd. (600995 CH)

Guangdong Meiyan Jixiang Hydrpwr (600868 CH)

Sichuan Xichang Electric Power Co, Ltd. (600505 CH)

Hunan Chendian Int'L Dev. Share Holding (600969 CH)

Guodian Changyuan Electric Power Co. (000966 CH)

Tianjin Jinran Public Utilities (1265 HK)

Shanghai Dazhong Public Utilities - A (600635 CH)

Heilongjiang Intrchna Watrtrertmt (600187 CH)

Beijing Water Business Doctor Co, Ltd. (300055 CH)

Shaanxi Provincial Natural Gas Co, Ltd. (002267 CH)

Huaneng Power International Inc (Adr) (HNP US)

Harbin Hatou Investment Co, Ltd. (600864 CH)

Guangzhou Devotion Thermal Tech (300335 CH)

China Datang Corp Renewable Power (1798 HK)

Zhejiang Fuchunjiang Envtl Thmltc (002479 CH)

Tianjin Binhai Energy & Devel. Co., (000695 CH)

Shanghai Safbon Water Service (300262 CH)

Fujian Mindong Electric Power Co, Ltd. (000993 CH)

Jointo Energy Investment Co.,Ltd. Hebei (000600 CH)

Inner Mongolia Mengdian Huaneng Thermal (600863 CH)

Zhongshan Public Utilities Group (000685 CH)

Jiangsu Eastern Shenghong Co., Ltd. (000301 CH)

TUS Environmental Science and Technology Development (000826 CH)

TUS Environmental Science and Technology Development

Liaoning Hongyang Energy Resource Invest (600758 CH)

Zhejiang Zheneng Electric Power A (600023 CH)

Ningbo Thermal Power Co, Ltd. (600982 CH)

Guangdong Baolihua New Energy Stock A (000690 CH)

Shanghai Dazhong Public Utilities - H (1635 HK)

Softening Coal Prices and Improving Demand Will Drive a Better 2017 Outlook for Coal-Fired IPPs.