Citigroup: Lowered China Resources Power (00836) target price to HK$19, rating downgraded to "Neutral"

Citigroup released a research report stating that it has lowered the target price of CHINA RES POWER (00806) by 11.6% from HK$21.5 to HK$19, and downgraded the rating from "buy" to "neutral". Citigroup stated that the downward adjustment of coal power prices is expected to decrease by 3.5% in 2026, mainly due to contracts signed in Guangdong. At the same time, the unit fuel costs of coal-fired power plants are increasing. Therefore, the company's net profit forecast for 2026 has been lowered by 8.3%, and the net profit forecast for 2027 has been lowered by 7.9%. The downgrade of the company's rating to "neutral" instead of "sell" is because its expected dividend yield for 2025 is 6.4%, which is acceptable but still lower than that of its peer, Huaneng Power International, Inc. (00902), at 8.5%, with a dividend payout ratio of 40%, which is also lower than Huaneng's 50%. For the forecast for 2026, the bank tends to choose CHINA POWER equipment suppliers rather than operators, as the latter may face a decrease in profit margins due to market electricity price reductions resulting from China's lack of electricity shortages.