华电国际(600027.SS) 新增下行90日催化剂观察

Adding Downside 90-Day Catalyst Watch Direction:Downside Duration:Within 90 Days, expected event date 27 Aug 2026Catalyst:Earnings We open a 90-day downside Catalyst Watch, expecting Huadian’s 2Q26E results (tobereleased on 27-Aug)to miss market expectations.We forecast net profitattributable to owners of the parent company to -23% yoy to Rmb1,474m in 2Q26E,with (i) coal-fired power output -10% yoy in 2Q26E given more competition fromnew coal-fired plants and substitution by renewables; (ii) standard coal cost atRmb850/tonne, +8.0% yoy and +4.0% qoq; (iii) relatively flat yoy on-grid tariff withhigher capacity tariff per unit of coal-fired output (for capacity tariff +65% yoy andreducedcoal-fired output)offsetting lowered market-based tariffs;and(iv)investment income, primarily from 27%-owned Huadian New Energy (600930 CH,not covered), to -20% yoy to Rmb1,013m for tariff and utilization cuts. Consensus(Bloomberg) is forecasting Huadian’s 2026E net profit to -18% yoy to Rmb4,977m.We expect consensus EPS and DPS to be cut. Pierre Lau, CFAAC+852-2501-2716pierre.lau@citi.com Huadian Power International Investment strategyWe rate Huadian Power as Sell expecting its earnings peaked in 2025 and then to decline in 2026-27E owing to tariff and generation reductions while coal cost reduction probably to be limited. Valuation Our target price of Rmb4.35 is based on a DCF model, which we think is suitable for power companies such as Huadian thatoperate in a largely stable industry with predictable cash flows. Our model factors in our earnings forecasts up to 2030E and aterminal growth rate of 4.0% thereafter. Our WACC for Huadian is 7.8%, assuming: (1) a risk-free rate of 5.2%, (2) a market riskpremium of 6.8%, (3) an equity beta of 1.04x, according to Bloomberg, (4) 6.5% cost of debt, (5) a targeted debt-to-capital ratioof 60.0%, and (6) a corporate tax rate of 25%. Risks Upside risks that could keep the stock above our target price include: 1) lower-than-expected coal prices; 2) more-than-expected power generation; and 3) less-than-anticipated on-grid tariff cuts. If you are visually impaired and would like to speak to a Citi representative regarding the detailsof the graphics in this document, please call USA 1-888-500-5008 (TTY: 711), from outside theUS +1-210-677-3788 Appendix A-1 ANALYST CERTIFICATION The research analysts primarily responsible for the preparation and content of this research report are either (i) designatedby “AC” in the author block or (ii) listed in bold alongside content which is attributable to that analyst. If multiple ACanalysts are designated in the author block, each analyst is certifying with respect to the entire research report other than(a) content attributable to another AC certifying analyst listed in bold alongside the content and (b) views expressed solelywith respect to a specific issuer which are attributable to another AC certifying analyst identified in the price charts orrating history tables for that issuer shown below. Each of these analysts certify, with respect to the sections of the reportfor which they are responsible: (1) that the views expressed therein accurately reflect their personal views about eachissuer and security referenced and were prepared in an independent manner, including with respect to Citigroup GlobalMarkets Inc. and its affiliates; and (2) no part of the research analyst's compensation was, is, or will be, directly orindirectly, related to the specific recommendations or views expressed by that research analyst in this report. IMPORTANT DISCLOSURES Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within thepast 12 months from Huadian Power International.Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Huadian Power International.Citigroup Global Markets Inc. or its affiliates received compensation for products and services other than investment bankingservices from Huadian Power International in the past 12 months.Citigroup Global Markets Inc. or its affiliates currently has, or had within the past 12 months, the following as investmentbanking client(s): Huadian Power International.Citigroup Global Markets Inc. or its affiliates currently has, or had within the past 12 months, the following as clients, and theservices provided were non-investment-banking, securities-related: Huadian Power International.Citigroup Global Markets Inc. or its affiliates currently has, or had within the past 12 months, the following as clients, and theservices provided were non-investment-banking, non-securities-related: Huadian Power International.Citigroup Global Markets Inc. and/or its affiliates has a significant financial interest in relation to Huadian Power International.(For an explanation of the determination of significant financial interest, please refer to the