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On Tuesday, UBS analysts revised their stance on China Resources Power Holdings Co. Ltd (836:HK) (OTC:CRPJY), downgrading the stock from Neutral to Sell, and also reducing the price target to HK$16.80 from the previous HK$18.00. This change reflects adjustments in the firm’s earnings projections.
The downgrade was prompted by new earnings estimates and a base case assumption for coal prices in 2025. UBS analysts now anticipate coal to be priced at Rmb650 per ton in that year. They also noted that if coal prices were to fall to Rmb600 per ton, China Resources Power’s earnings could potentially increase by about 24% in 2025.
The analysts provided a detailed rationale for their power demand growth estimate of 3.7%. This projection is based on several factors, including a 2.6 percentage point contribution from organic GDP growth and a 0.6 percentage point increase due to structural growth in the electrification of electricity-intensive industries. Additionally, a 0.5 percentage point rise is expected from artificial intelligence, given the structural growth of data centers. However, a slight decline is anticipated from a drop in export volumes.
The revised price target of HK$16.80 takes into account the updated earnings forecast and the impact of fluctuating coal prices on the company’s profitability. The UBS team’s analysis suggests that while there are growth opportunities, these are balanced by potential challenges in the energy sector that China Resources Power may face.
China Resources Power Holdings Co. Ltd, which is traded on the Hong Kong Stock Exchange and over-the-counter markets, is a company that investors keep a close eye on due to its position in the energy sector, particularly in the context of changing commodity prices and the ongoing energy transition.
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