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Recently, the capital market has ushered in the blossoming of the iron tree. The hydropower index, which has been fluctuating before, has been rising all the way since three weeks ago, as if the sky is its limit, and players such as Huaneng Hydropower (600025) and Yangtze River Power (600900) have ushered in their own sweet moments.
Hydropower index increases
The so-called existence is reasonable. The rise of the hydropower sector has a certain relationship with the performance of players. For example, Huaneng Hydropower's net profit attributable to the parent company in the first quarter of this year increased by 17% year-on-year, breaking through the 1 billion yuan mark.
For hydropower players, it's as if growth has become the main theme.
In addition, the recent increase in water and electricity prices has also received widespread attention from the society. According to the author's rough statistics, Hunan, Anhui and other places have announced electricity price adjustment plans, such as the second level of Hunan to increase the price of 5 cents per kilowatt hour, and the third level of the price increase of 3 cents per kilowatt hour. Anhui has adjusted the proportion of peak and valley electricity price increases and decreases. Many other places are also expected to increase prices.
As a result, many investors feel that this will also support the performance of players such as hydropower, and eventually form a virtuous circle. But is that really the case? Today, the author will take you to find out.
First, unhurried, steady development
As a member of the clean energy army, the development of the mainland's hydropower industry in recent years can basically be described as stable. By the end of the first quarter of this year, the mainland's cumulative installed hydropower capacity reached 423 million kilowatts, more than one year after another. At the same time, the utilization hours of hydropower equipment have also increased significantly, reflecting the improvement of market absorption capacity.
Installed hydropower capacity
At the end of the first quarter of this year, with the issuance of high-level energy guidance, it also set the tone for the development of hydropower: steadily promote the development and construction of hydropower. And just last month, the first unit of the largest hydropower station under construction in the Yellow River Basin (with a total installed capacity of 2.32 million kilowatts) was connected to the grid for power generation, which can be regarded as a contribution to the optimization and transformation of the energy structure.
Against this backdrop, how are the players doing? To sum up, players have had a rollercoaster ride last year. Due to the poor water supply in the second quarter of last year, the power generation of players has declined sharply, such as Yangtze River Hydropower and Huaneng Hydropower's net profit in the second quarter fell by 35% and 24% year-on-year, respectively.
It was not until the third quarter that the water supply in the major river basins was restored, driving the year-on-year recovery of power generation, and the profitability of players finally rebounded. If the profit is good, the stock price will naturally be no different. According to the author's rough statistics, the A-share hydropower sector rose and fell by 11.3% last year, far outperforming the CSI 300 Index.
Performance of hydropower players
This upward sentiment has spilled over into this year due to the general growth in industry performance.
At the beginning of this year, the performance of the hydropower "giant" Yangtze River Power was particularly prominent, with its stock price and market value hitting a new high since its listing. Another important reason is that Yangtze Power adheres to a high dividend strategy, such as the dividend rate in 2022 is as high as 94%. In the absence of a clear investment theme at the beginning of the year, high-dividend strategies tend to be more advantageous in the context of a weaker market or a slowdown in economic growth.
Therefore, hydropower has become a "stable happiness" in the eyes of many investors.
Second, how to look at growth
According to the official climate center, temperatures are expected to be high in most parts of the country this year, and precipitation is expected to be close to normal to high across the country. This has also laid a good foundation for this year's hydropower generation.
For example, in the first quarter of this year, the hydropower stations of the Three Gorges Water Conservancy (600116) and its holding company have completed more than 290 million kilowatt hours of on-grid electricity, an increase of 191% year-on-year. And the company's electricity sales last year hit a record high.
If you open up the hydropower industry chain, you will find that the players in each link have their own duties, which are mainly divided into the investment and construction period and the operation period. From the perspective of the operating costs of hydropower players, the depreciation of fixed assets accounts for more than 50% of the operating costs of hydropower and is an important source of costs.
Hydropower industry chain
Therefore, depreciation due will often bring continuous performance increment to hydropower in the medium to long term. There are professional bodies that have analyzed the depreciation situation of the major players in the market. For example, the depreciation of the generating units of the seven operating power stations of Yalong River Hydropower will expire from 2039, which will save more than 1.4 billion yuan, while the performance growth of Yangtze River Power will be realized earlier, and the depreciation of most units will expire last year, saving more than 8 billion yuan.
3. The hope of the whole village
According to the analysis of professional institutions, it is expected that the electricity consumption of the whole society this year will be 9.8 trillion kilowatt hours, an increase of about 6% over 2023, and the maximum electricity load of the national unified adjustment will increase by 100 million kilowatts compared with last year.
This is undoubtedly very beneficial to the improvement of the performance of hydropower operators.
In addition, when it comes to hydropower, one topic that cannot be avoided is pumped hydro storage, which is also an important part of the regulation of the power system. It is expected that in three years, the pumped storage power station will reach more than 80 million kilowatts. This is also the key main battlefield for players to start the second growth curve.
In addition, in major hydropower provinces such as Sichuan and Yunnan, there is still room for further increases in electricity prices in the province. For example, the average monthly trading price of clean energy in Yunnan last year was only about 0.23 yuan/kWh, which is still relatively large compared with the average trading price of coal.
Therefore, a sector that has been ignored by the capital market for many years is expected to come to the stage in the next two years.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.