Guotai Junan: Maintain a "buy" rating on the public utility industry and seize the structural opportunities in specific sub-sectors.

Guotai Junan released a research report stating that it maintains a "buy" rating for the utility industry. The positioning of power under reform has changed, capturing the structural opportunities of niche sectors. (1) Thermal power: selected varieties with locational advantages and increasing dividend attractiveness. (2) Hydropower: large hydropower projects in high-quality basins. (3) Nuclear power: long-term implicit returns are worth paying attention to. (4) Wind and solar power: waiting for industry factors to improve under policy drive, selecting high-quality stocks with a high proportion of wind power. Event: The National Energy Administration and the National Bureau of Statistics released electricity generation data for January-December 2024: The national electricity consumption increased by 6.8% year-on-year in the first twelve months; the electricity generation of large-scale power plants increased by 4.6% year-on-year in the first twelve months. Main points of Guotai Junan: The growth rate of electricity consumption in 2024 slightly slowed down. In 2024, the electricity consumption of the whole society increased by 6.8% year-on-year, a decrease of 0.3 percentage points compared to January-November 2024. By industries, the year-on-year growth rates of electricity consumption in the primary/secondary/tertiary industries and residential sectors were +6.3%/+5.1%/+9.9%/+10.6%, a decrease of -0.5/-0.2/-0.5/-1.0 percentage points from January-November 2024. Looking at the data from December: 1) In December 2024, industrial value-added increased by 6.2% year-on-year, an increase of 0.8 percentage points from November; total retail sales of consumer goods increased by 3.7% year-on-year, an increase of 0.7 percentage points from November; 2) In December 2024, the national average temperature was -2.9C, a decrease of 0.1C year-on-year. Looking ahead to 2025, the expected year-on-year growth rate of electricity consumption is +5.5%. Hydropower has changed from a decrease to an increase, while thermal power growth has turned negative. In December 2024, the electricity generation of large-scale power plants increased by 0.6% year-on-year, a decrease of 0.3 percentage points from November. By power sources, in December 2024, hydropower and wind power changed from a decrease to an increase, thermal power growth turned negative, and nuclear power and photovoltaic power accelerated their growth. In December 2024, hydropower grew by 5.5% year-on-year, an increase of 7.4 percentage points from November. The bank speculates that this is related to improved water inflows (in December 2024, the average inflow of the Three Gorges Reservoir was 7019 cubic meters per second, an increase of 3.9% year-on-year, an increase of 24.8 percentage points from November). In December 2024, wind power grew by 6.6% year-on-year, an increase of 9.9 percentage points from November; photovoltaic power grew by 28.5% year-on-year, an increase of 18.2 percentage points from November. The bank speculates that this is related to the low base in the same period of the previous year (in December 2023, the hours of photovoltaic utilization were 68 hours, which was 13 hours lower than the average hours from 2019 to 2022). In December 2024, nuclear power grew by 11.4% year-on-year, an increase of 8.3 percentage points from November. In December 2024, thermal power decreased by 2.6% year-on-year, a decrease of 4.0 percentage points from November. The bank speculates that this is related to weak electricity demand and the strengthening of the clean energy displacement effect. Risk factors: Lower-than-expected electricity demand, wind and solar power integration issues exceeding expectations, coal prices exceeding expectations, market electricity prices lower than expected, etc.