Bank of America Securities: Raising the target price of Huadian Power International Power (01071) to HK$3.7, reaffirming the “outperforming market” rating

The Zhitong Finance App learned that Bank of America Securities released a research report saying that Huadian International (01071)'s short-term profit is still under pressure from rising coal prices, but the target price for H shares was raised from HK$3.5 to HK$3.7, and the target price for A-shares was simultaneously raised from RMB 4.1 to RMB 4.3 to reflect better-than-expected electricity price levels, lower financing costs, and increased carbon trading revenue.

The bank pointed out that the improvement in electricity prices in the second quarter was mainly driven by rising electricity prices in the spot and monthly markets along with coal prices, and that revenue from capacity electricity prices was shared among lower power generation; Shandong is still the most mature electricity market in the mainland, and electricity prices are closely linked to spot prices, which helps to transfer fuel costs. Management expects the Qinhuangdao benchmark coal price to fluctuate around 850 yuan per ton in the second half of the year, but the low coal price base in the third quarter of last year will cause fuel costs to face a higher comparison base in the coming quarter.

Gas power generation fell by more than 10% year on year in the first half of the year, but profits improved. As the company deliberately reduced low profit periods and concentrated on peak demand generation, Tianjin and Guangdong's capacity electricity bill mechanisms were also supported.

The bank raised its profit forecast for 2026 to 2028 by an average of about 20%. The main assumptions include electricity prices remaining flat year on year in 2026, with the previous forecast falling 3%; debt costs of 2.3%, previously 2.5%; and non-operating income of RMB 1 billion, compared to RMB 713 million previously.