Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Wednesday, UBS analysts issued a downgrade for CGN Power Co Ltd. (1816:HK) (OTC: CGNWF) stock, changing their recommendation from Buy to Sell. Accompanying the downgrade, they also significantly reduced the price target from HK$4.60 to HK$2.00. The revision comes amid concerns about the company’s future profitability due to anticipated challenges in the energy market.
According to the analysts, CGN Power is likely to experience a high risk of margin squeeze for several reasons. The firm is expected to face a steeper power tariff cut in 2025 compared to its peers. Additionally, there is a potential for increased fuel costs in 2026. These factors have led UBS to adjust its earnings estimates for CGN Power for the years 2025 to 2027, which are now 14-23% below the consensus after a 20-26% cut in earnings projections.
Despite a year-to-date correction of 12% in CGN Power’s share price, UBS believes that the market has not fully accounted for the margin squeeze risk. This anticipated risk is primarily due to a hike in nuclear fuel costs from uranium supply contracts expected in 2026. The analysts suggest that the negative impact of the tariff reset has been largely priced into the market, but not the upcoming cost pressures.
UBS prefers China National Nuclear Power (CNNP) over CGN Power among nuclear independent power producers (IPPs). This preference indicates a more favorable outlook for CNNP in the face of the industry’s upcoming challenges.
Investors and market watchers will be closely monitoring CGN Power’s financial performance and strategic responses to the anticipated industry headwinds outlined by UBS. The downgraded rating and lowered price target reflect a cautious stance on the company’s stock amid a changing energy landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.