China Securities Co., Ltd. has released a research report stating that for thermal power, the market price of thermal coal is expected to rise year-on-year in the second quarter of 2026. In regions such as Guangdong and Jiangsu, tight power supply-demand dynamics and higher primary energy prices have led to a recovery in monthly electricity transaction prices, partially offsetting the increase in fuel costs. However, given the high proportion of annual contract electricity, the brokerage expects thermal power earnings for Q2 to Q3 2026 to remain under pressure despite the monthly price recovery.

For green power, significant pressure from new energy consumption, combined with Document No. 136 promoting the full market entry of new energy, is expected to weigh on both performance and valuations in the first half of 2026. On the power supply-demand front, due to the approval and commissioning pace of thermal power units, the growth rate of new thermal power installations nationwide is expected to slow in 2027. Coupled with the rebound in primary energy prices, long-term contract electricity prices in 2027 are likely to stabilize and recover. Overall, the power sector faces significant earnings pressure in the second quarter, though thermal power operations in regions like Jiangsu and Zhejiang, which have higher electricity demand growth, are expected to gradually improve.

Key Views from China Securities Co., Ltd.

Market Performance Review

From August 1 to August 6, the power sector (882528.WI) fell by 1.85%, while the CSI 300 Index rose by 2.32%, resulting in the power sector underperforming the broader market by 4.17 percentage points. Since the beginning of 2026, the power sector has risen by 5.61 percentage points, compared to a 1.39% increase in the CSI 300 Index over the same period. The power sector has outperformed the broader market by 4.22 percentage points year-to-date. On a sub-sector basis, from August 1 to August 6, the thermal power, hydropower, and gas segments (CITIC Index) changed by 0.51%, -4.22%, and 2.56%, respectively.

Thermal Coal Spot Price Up 3.03% Month-on-Month, 23.19% Year-on-Year

As of August 9, the spot price of 5,500 kcal thermal coal at Qinhuangdao stood at 850 yuan per ton, up 3.03% month-on-month and 23.19% year-on-year. For imported coal, the price of 5,500 kcal Indonesian coal at Guangzhou Port was 924 yuan per ton on August 8, up 2.45% month-on-month and 30.65% year-on-year.

Qinhuangdao Port Coal Inventory Down 3.52% Month-on-Month, Up 13.72% Year-on-Year

In terms of coal inventory, as of August 7, Qinhuangdao Port held 6.3 million tons, a decrease of 230,000 tons from the previous month (down 3.52%) and an increase of 760,000 tons year-on-year (up 13.72%). Meanwhile, Guangzhou Port's inventory on August 7 was 3.545 million tons, an increase of 110,000 tons from the previous month (up 3.2%) and an increase of 517,000 tons year-on-year (up 17.07%).

Investment Recommendations

In the power sector, the brokerage continues to favor thermal power companies transitioning to new energy operations, including Gansu Energy Development Co., Ltd., Jingneng Power Co., Ltd., Shanghai Electric Power Co., Ltd., Huadian Power International Corporation Limited, Huaneng Power International, Inc., Anhui Wenergy Company Limited, and China Resources Power Holdings Company Limited. For defensive positions, it recommends China National Nuclear Power Co., Ltd., China Three Gorges Renewables (Group) Co., Ltd., and Fujian Zhongmin Energy Co., Ltd.. Additionally, the brokerage recommends stable hydropower leader China Yangtze Power Co., Ltd. and Sichuan Chuantou Energy Co., Ltd., which benefits from improving provincial power market prices.

Risk Analysis

Risks include rising coal prices, declining regional utilization hours, falling electricity prices, slower-than-expected new energy installation progress, and volatility in new energy generation output.