Bank of America Merrill Lynch Securities: Defensive yield rates such as coal-fired and hydropower performed excellently in the utility sector last year, upgrading Huaneng Power (00902) to a "buy" rating.

Bank of America Securities released a research report stating that MSCI China utility stocks rose by about 17% last year, performing in line with the overall market trend. Defensive stocks, such as thermal power and hydropower, showed excellent performance in the sector. It is recommended for investors to choose defensive stocks this year and to add to individual high-quality Beta stocks when their prices decline. Bank of America's selection of defensive utility stocks includes HUANENG POWER (00902), HUADIAN POWER (01071), China Yangtze Power (600900.SH), and BEIJING ENT (00392), while high-quality Beta stocks include CHINA RES GAS (01193), Jiangsu Zhongtian Technology (600522.SH), and Goldwind Science & Technology (02208). Bank of America expects that coal prices will decline by 16% and 6% year-on-year in the next two years, falling to an average of 720 and 680 yuan per ton, which will help offset the decline in electricity prices. Consequently, the rating of Huaneng H shares has been upgraded from "neutral" to "buy," with the target price raised to 5.5 Hong Kong dollars. In contrast, Bank of America holds a more cautious stance towards wind power and photovoltaic power generation companies, photovoltaic module companies, and Hong Kong utility stocks, with representative stocks being China Longyuan Power Group Corporation (00916), JA Solar Technology (002459.SZ), and CKI HOLDINGS (01038). Considering the annual decrease in thermal power electricity prices, which will have a greater impact on wind power and photovoltaic power generation companies, Bank of America has downgraded the rating of China Longyuan Power Group Corporation to "underperforming the market," believing that its profit risks are greater, with an average profit forecast for 2024 to 2026 lowered by 25%. The H-share target price has been reduced from 7 yuan to 5.2 yuan. Due to weak gas demand, rising upstream prices, and higher liquefied natural gas (LNG) prices, Bank of America also downgraded CHINA RES GAS to "neutral," with earnings forecasts for the next two years decreased by 18% and 13% respectively, and the target price reduced from 36.7 Hong Kong dollars to 29 Hong Kong dollars. Furthermore, Bank of America downgraded the investment ratings of CHEUNG KONG and GUANGDONG INV to "neutral," reflecting a weakening attractiveness of dividend returns and potential increases in financing and amortization costs. The target prices have been reduced to 54.6 Hong Kong dollars and 6.1 Hong Kong dollars respectively.