Citigroup: Upgrades Huaneng Power (00902) to "buy" rating, raises target price to HK$6.

Citibank released a research report stating that it has upgraded its rating on HUANENG POWER Limited (00902) from "sell" to "buy", and raised the target price by 62% to 6 Hong Kong dollars. The bank pointed out that the adjustment is based on its upward revision of the company's net profit forecast for the next two years by 12% and 8%, mainly due to the increase in profit margin brought about by the decrease in unit coal costs, completely offsetting the impact of the decline in electricity prices, especially as coal prices have been weaker than expected recently. The bank expects Huaneng to have a dividend of 0.31 RMB per share this year, representing an H-share yield of 7.8% and an A-share yield of 4.7%, making it particularly attractive to domestic investors as the yield on 10-year government bonds in the mainland is only 1.62%. The bank is more bullish on coal-fired independent power generation companies than renewable energy generation companies, as the decrease in coal costs brings greater profits and the decrease in electricity prices is relatively small.