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On Wednesday, UBS analysts downgraded China Power International (2380:HK) (OTC: CPWIF) stock rating from Buy to Neutral, adjusting the price target to HK$3.00 from the previous HK$5.10. The revision comes as UBS anticipates a weakening in the company’s fundamentals, including a projected 6% blended tariff cut in 2025 and a decrease in coal power utilization hours, which are expected due to a slower growth in power demand. The new growth outlook is estimated at 5% from 2025 to 2030, a reduction from the previous forecast of 6%.
UBS has also adjusted its earnings estimates for China Power International for the years 2025 to 2027, which are now 14% to 29% below the consensus. This is after the firm slashed its forecasts by 20% to 28%. The downgrade reflects concerns about the company’s future earnings potential in light of these anticipated changes.
The share price of China Power International has already seen a 9% decline since the beginning of the year. UBS believes that the current market price has adequately factored in the potential negative impacts from the anticipated tariff reset and the reduced utilization hours of coal power.
The analyst from UBS, while revising the outlook for China Power International, stated, "We are turning Neutral on CPID, as we believe its fundamentals are likely to soften." The statement further detailed the reasons behind the downgrade and the new price target, citing the expected tariff cuts and lower utilization hours as key factors influencing the company’s earnings outlook.
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