Guosheng Securities: Electricity sector showing counter-cyclical characteristics, recommend paying attention to sector allocation opportunities.

Guosheng Securities released a research report stating that the countercyclical nature of electricity is prominent, and the style switch resonates with fundamental support, emphasizing the layout of opportunities. The firm believes that the collective increase in holdings of electricity central enterprises demonstrates shareholder confidence. In the short-term market volatility, market style preference is downward, highlighting the countercyclical nature of electricity. At the same time, various sub-sectors of electricity have fundamental support. With the gradual implementation of increased capital, the electricity sector is expected to become a high-quality track in the capital market with both stability and growth. It is recommended to pay attention to opportunities in the electricity sector, as current coal prices falling more than expected support improvements in electricity profits, emphasizing opportunities in thermal power generation. The main points of Guosheng Securities are as follows: The State-owned Assets Supervision and Administration Commission fully supports the increase in holdings and repurchases of listed companies of central enterprises, and China Chengtong proposes a trillion yuan increase in holdings plan On April 8, the State-owned Assets Supervision and Administration Commission of the State Council stated that it will fully support the initiative of central enterprises and their holding listed companies to continuously increase their holdings and repurchases, effectively safeguard the rights and interests of all shareholders, continuously consolidate market confidence in listed companies, strive to enhance the company's value, and fully demonstrate the responsibility and commitment of central enterprises. As an important state-owned capital operations platform under the State-owned Assets Supervision and Administration Commission, on April 8, China Chengtong Holdings Group Co., Ltd. decided to use a stock repurchase and increase loan funds of 100 billion yuan in accordance with the relevant regulations of the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission, to increase its holdings of listed companies' shares. On April 7, its subsidiaries Chengtong Financial Holdings and Chengtong Investment have increased their holdings of central enterprise stocks and ETFs, clearly stating that they will "be a good long-term investor" and support the high-quality development of central state-owned enterprises. Intensive responses from electricity central enterprises, increase in holdings and repurchases demonstrate industry confidence Multiple electricity central enterprises have issued increase in holdings announcements, including: China National Nuclear Power: On April 7, the company's chairman Lu Tiezhong proposed to repurchase some of the company's shares through centralized bidding trading to reduce registered capital or equity incentives, optimize capital structure, and enhance shareholder value. The repurchase price will not exceed 150% of the average trading price of the stock for the 30 trading days before the resolution of the board of directors, with a total amount of 3-5 billion yuan, a repurchase period of 12 months, and the funds from the company's own funds or bank loans. CGN Power Co., Ltd.: On April 8, 2025, CGN Power Co., Ltd. received a notice from its controlling shareholder CGN Power Co., Ltd. Group Co., Ltd. (referred to as "CGN") that CGN plans to increase its holding of the company's H shares within 12 months from the date of this announcement, with the accumulated percentage not exceeding 5% of the total number of H shares issued by the company as of April 8, 2025. The fund arrangement for the increase plan is from CGN's own funds. China Three Gorges Renewables: On April 8, 2025, the company announced that based on confidence in the company's future development, its controlling shareholder Three Gorges Group plans to increase its holdings of the company's shares through secondary market transactions including centralized bidding and block trades within the next 12 months, with an increase of no less than 1.5 billion yuan and no more than 3 billion yuan. This increase does not set a fixed price range, and will combine with market conditions to carry out stock repurchases, with funds from Three Gorges Group's own funds or specific loan funds for stock purchases from financial institutions. Sichuan Chuantou Energy: On April 8, 2025, the company announced that its controlling shareholder Sichuan Energy Development Group Co., Ltd. plans to increase its holdings of the company's shares within the next 12 months in a manner permitted by the Shanghai Stock Exchange, with an amount not less than 0.5 billion yuan and not more than 1 billion yuan. This increase does not set a price range, and will carry out the increase plan based on the fluctuation of the company's stock price and the overall trend of the capital market. The funds come from the controlling entity's own funds or self-raised funds. Electricity as a core asset of "middle and characteristic estimation" is expected to directly benefit and reshape valuation space In the current market volatility, the defensive advantage of utilities is prominent, and the market's recognition of high dividend targets is once again increasing. As a core asset of "middle and characteristic estimation", valuation is expected to be reshaped. In 2024, the asset scale of central enterprises exceeded 90 trillion yuan, a year-on-year increase of 5.9%; achieving added value of 10.6 trillion yuan and total profits of 2.6 trillion yuan. Electricity central enterprises bear the responsibility of ensuring the supply of energy to the whole society. With the market value management of central state-owned enterprises included in performance evaluation, the enthusiasm of listed companies to improve market value management will guide the market to correctly understand the investment value of public utilities. Currently, the (SW) PE(TTM) and PB median values for electricity are 15.87 and 1.53 respectively, both lower than the A-share average of 22.82 and 2.22, indicating a position of undervaluation. In the current uncertain market expectation environment, the dividend style advantages of stable low volatility in public utilities are prominent, combining fundamental improvement and growth potential to enhance valuation space. Risk warning: Risks of macro market volatility; Risks of delayed policy implementation; Risks of upstream price increases.