Societe Generale Securities: Gas Prices Drive Upstream Gas Profit Growth, Focus on Improving Thermal Power Bargaining Power

The Zhitong Finance App learned that in the second quarter of 2026, Societe Generale Securities released a research report saying that in the second quarter of 2026, the overall utility industry achieved revenue of 490.3 billion yuan, -2.12%; realized net profit from operating activities of 45.2 billion yuan, -16.78% year over year; realized net cash flow from operating activities of 145.9 billion yuan, +1.75% year over year, of which thermal power, hydropower, green power, nuclear power and gas achieved net profit of 157, 154, 51, 49, 4.1 billion yuan, respectively. The fundamentals of the thermal power industry are generally under pressure due to rising coal prices compounded by falling electricity prices. However, the bargaining power has shown signs of a marked increase, and the decline in electricity prices for many thermal power companies narrowed sequentially in the second quarter.

Societe Generale Securities's main views are as follows:

2026Q2 Environmental Industry Performance Overview

Net profit attributable to mother of the 26Q2 sector was +22.01% year-on-year, and profits of all sub-sectors increased year-on-year. In 2026Q2, the environmental protection sector achieved total revenue of 89.520 billion yuan, +12.86% year-on-year; realized net profit to mother of 8.624 billion yuan, +22.01% year-on-year. Looking at the spin-off, net profits of solid waste, sanitation, water and water treatment, and environmental protection equipment from various sub-sectors of the environmental protection industry were 36.75, 5.56, 33.78, and 1,072 billion yuan, respectively, +36.62%, +0.18%, +8.93%, and +44.67%, respectively.

Sorting out the allocation of public funds

By the end of 2026H1, public environmental protection public funds (equity+hybrid) accounted for 0.69% of heavy holdings, -0.47pct quarter-on-quarter, and a low allocation of 2.60pct. The top five major stocks are Changjiang Electric Power, Guanghui Energy, China Nuclear Power, Three Gorges Energy, and Sichuan Investment Energy. As of the end of 2026H1, the share of the public environmental protection industry in the market value of heavy holdings of equity-type and hybrid public funds was 0.69%, -0.47 pct quarter-on-quarter, with a low allocation of 2.60 pct. Due to the upward trend in the market trend, the holdings of public funds in various subsectors of utility and environmental protection generally declined compared to the end of the previous quarter. Among them, thermal power and green power holdings declined less. By the end of 2026H1, the utility sector accounted for 0.60%, -0.42pct month-on-month, -1.22pct year-on-year, 2.69pct; the environmental protection sector accounted for 0.09%, -0.05pct month-on-month, -0.14pct year-on-year, and 0.54 pct lower.

Risk warning: Market-based electricity transactions cause the risk of electricity price fluctuations, the risk of fluctuations in incoming air volume, the risk of a sharp rise in thermal coal prices, falling short of expectations in the approval process of new energy project resources, the risk of fluctuating incoming water, the risk of a sharp rise in photovoltaic module prices, and the risk of reduced electricity demand due to the macroeconomic downturn.