Breaking through to new highs against the market trend! How were the "twin heroes" in hydropower forged?

On June 7th, the stock prices of China Yangtze Power (600900) and Huaneng Hydropower (600025) both rose. By the closing bell, China Yangtze Power's stock price increased by 1% to close at 28.31 yuan per share, while Huaneng Hydropower's stock price rose by 1.52% to close at 10.71 yuan per share. Both stocks have been continuously breaking through recently, with closing prices hitting historic highs on the 7th.

According to data from the National Energy Administration, renewable energy has become a new force in ensuring China's power supply, with installed capacity reaching 1.45 billion kilowatts, accounting for over 50% of the country's total installed power generation capacity, historically surpassing thermal power installed capacity. Under the "dual carbon" strategy, listed hydropower companies have mostly seen steady and positive profitability.

Information shows that China Yangtze Power is mainly engaged in hydropower generation, investment and financing, pumped storage, smart integrated energy, new energy, and power distribution businesses. It is China's largest listed power company and the world's largest listed hydropower company. The company operates and manages six cascade power stations including Wudongde, Baihetan, Xiluodu, Xiangjiaba, Three Gorges, and Gezhouba, forming the world's largest clean energy corridor.

In 2023, China Yangtze Power's operating income was 78.11 billion yuan, a year-on-year increase of 13%; net profit attributable to shareholders was 27.24 billion yuan, a year-on-year increase of 15%. In the first quarter of 2024, the company's operating income was 15.64 billion yuan, a year-on-year increase of 1.6%; net profit attributable to shareholders was 3.97 billion yuan, a year-on-year increase of 9.8%.

Huaneng Hydropower is a large basin hydropower enterprise controlled and managed by China Huaneng Group, and is a core and leading enterprise in nurturing Yunnan's hydropower pillar industry and implementing the "West-East Power Transmission" and "Yun Power Export" initiatives, as well as a major participant in "Tibetan Power Export". In 2023, the company's operating income was 23.461 billion yuan, almost flat year-on-year; net profit attributable to shareholders was 7.638 billion yuan, a year-on-year increase of 5.6%. In the first quarter of 2024, the company's operating income was 4.42 billion yuan, a year-on-year increase of 3.6%; net profit attributable to shareholders was 1.065 billion yuan, a year-on-year increase of 17% As industry leaders, Changjiang Electric Power and Huaneng Hydropower share another common feature, which is high dividends.

Changjiang Electric Power is the first company in the Chinese capital market to explicitly state a high cash dividend policy lasting for 10 years in its articles of association. As early as 2016, the company clearly stated in its articles of association that the annual cash dividend should not be less than 50% of the parent company's distributable profits for the year, and committed to a minimum cash dividend per share of 0.65 yuan from 2016 to 2020, with an annual dividend of not less than 14.3 billion yuan, and a cumulative cash dividend of not less than 71.5 billion yuan over 5 years; from 2021 to 2025, the dividend ratio will not be less than 70%.

According to Wind statistics, excluding the planned cash dividend amount of 20.1 billion yuan in 2023, Changjiang Electric Power has already accumulated cash dividends of 162.8 billion yuan since its listing.

Huaneng Hydropower has also maintained a high dividend payout ratio since its listing, with a compound annual growth rate of cash dividends exceeding 20%, totaling over 18.7 billion yuan in dividends, accounting for approximately 57% of distributable profits. In 2023, the company plans to distribute a cash dividend of 0.18 yuan per share to all shareholders, totaling 3.24 billion yuan in cash dividends.

Changjiang Electric Power and Huaneng Hydropower have been favored by the market, with analysts pointing out that this may be related to the early arrival of the summer peak electricity demand. Since the beginning of this summer, temperatures in most parts of the country have been higher than usual, triggering an early start to the "peak summer" electricity demand. On June 7th, the Green Power ETF (562550) rose by 1.94%, with the top ten holdings including Changjiang Electric Power, Three Gorges Energy, State Power Investment Corporation, among others, all seeing their stock prices rise.

Furthermore, the market's recognition of "AI's ultimate destination is electricity" is gradually increasing, which may benefit the power sector.

Huatai Securities believes that the development of AI may bring about unexpected electricity demand, becoming an important driving factor for electricity growth. The significant increase in the value of data center equipment and the improvement in the overall workload rate of AI data centers (up to 100% during training) further amplifies the potential losses caused by the instability of the power supply, thereby increasing the demand for stable and uninterrupted power supply. Currently, overseas internet giants are the largest buyers of green power purchase agreements (PPAs). Huatai Securities also stated that the development of AI will further boost the global power equipment cycle, and the launch of domestic data centers will bring growth opportunities for high-quality suppliers in various sectors domestically.

Source: Securities China (ID:quanshangcn) Original Title "Hitting a New High Against the Market! "How were the 'Twin Giants' of hydropower created?" Editor: Wang Yunpeng Proofreader: Ran Yanqing