Power industry: 3Q earnings are expected to improve

High utilization hours can hardly match high coal prices: In contrast to the first half of 2009, the electric power industry in the first half of 2010 experienced extremely high utilization of hourly growth rates and a renewed rise in coal price shocks. However, the high utilization hours are still difficult to withstand the impact of high coal prices. The profitability of the industry in the first half of the year was down year-on-year, and the absolute increase in net profit was maintained only by relying on the increase in scale.

2Q earnings remain low: In terms of QoQ, thermal power profit in 2Q10 remained at a low level, and its gross profit margin and net profit were similar to those in the first quarter. From a regional perspective, profit differentiation continued in the second quarter. In the Northeast and Central China, there has been a total loss. Profits in the coastal and North China regions have been relatively good, but the coastal area has also seen a certain decline.

Third-quarter earnings are expected to improve, but are still not enough: comprehensive coal prices (2% in the third quarter of the previous quarter), utilization hours (+1% in the previous quarter), and electricity generation (an increase of 8% in the chain). We expect the net profit of the thermal power industry in the third quarter to be The second quarter will increase by 20%-30%.

According to the end of the second quarter of the 27 thermal power listed companies, the estimated net profit for the third quarter was 4.26 billion yuan.

Although there was a significant improvement from the previous quarter, it was 6.2 billion yuan in the third quarter of 2009, a decrease of 25%-30%. Therefore, the profitability of the industry remains at a low level.

The impact of energy conservation and emission reduction on the power industry is neutral: There have been more recent news reports. For energy saving and emission reduction, and for the reduction of energy consumption per unit of GDP, some industries with high energy consumption have conducted industrial power cuts in areas where they are concentrated.

We believe that the limited time and extent of the implementation of the power restriction policy will have little impact on the high-energy-consuming industries. From the perspective of utilization hours and coal prices, the impact on the profitability of the power industry will be neutral.

We maintain the industry's “Synchronous Market-A” rating: We believe the industry's 3Q11 earnings are still improving, but they remain low, and far below the average level of all A-shares. We also consider the valuation and market hotspots transfer, we maintain the industry "Sync Market-A" rating.

This month recommended stock portfolios: Yangtze Power, Guangdong Power A and Shenzhen Energy.