China Resources Power Falls to Lowest in Year on Tariff ConcernJonathan Burgos
China Resources Power Holdings Co. slid to its lowest in a year after Credit Suisse Group AG downgraded the utility on concern electricity tariffs in the world’s second-largest economy will weaken through 2016.
China Resources Power slumped as much as 5.3 percent before trading 4.1 percent lower at HK$18.44 at the trading break in Hong Kong, heading for the lowest close since March 14, 2014. Credit Suisse says the state-owned company is most vulnerable to potential tariff cuts as 28 percent of its electricity is sold in Guangdong, Zhejiang and Shandong, provinces where rates are high. The investment bank yesterday trimmed its rating on the stock to underperform from neutral and lowered its share-price target to HK$17 from HK$22.
“We cut our FY2015-2016 EPS forecasts for China Resources Power by 13-17 percent, mainly due to potential on-grid tariff cuts for coal-fired power in 2015-16 that would more than offset benefits from the interest-rate cut and the coal price decline,” Dave Dai, an analyst at Credit Suisse in Hong Kong, wrote in a note today. “We believe there could be further downside from both thermal utilization and tariff cuts.”
Just two of 25 analysts covering the stock rate it a sell, according to data compiled by Bloomberg. Credit Suisse yesterday reaffirmed its underperform recommendation on Huaneng Power International Inc., while trimming its price target on the mainland company to HK$7.70 from HK$8.60. The stock fell 0.9 percent to HK$8.81 in Hong Kong today.
Mainland utilities sank last month after the National Development and Reform Commission said it may cut on-grid power prices on a drop in coal prices. China Resources Power has 70 generating plants, according to its website.