One week market review: this week, the CSI 300 index fell 0.94%, the power and utility index fell 4.14%, and the weekly relative yield was – 3.20%. In the Shenwan industry category, the increase of public utilities ranked 27th in 28 industries. Among them, the environmental protection engineering and service sector fell by 3.95%; Among the sub sectors of the power sector, thermal power decreased by 4.61%; Hydropower fell by 3.86%, and new energy power generation fell by 4.32%; Water sector fell 4.84%; Gas sector fell 5.55%; Testing services fell 2.82%.
Comments on changes: the CSI 300 index fell 0.94% this week. Affected by the international situation and the overall market, most of the stocks in each section fell. The thermal power sector fell by 4.61%, benefiting from the coal price stabilization policy and relying on the comprehensive background of integrating thermal power generation and wind power generation, Shenyang Jinshan Energy Co.Ltd(600396) rose by 9.19%, Huadian Energy Company Limited(600726) rose by 3.75% and Henan Yuneng Holdings Co.Ltd(001896) rose by 2.50%. The environmental protection sector fell 3.95%, Kingland Technology Co.Ltd(000711) rose 3.48%, Sinoma Energy Conservation Ltd(603126) launched equity incentive plan, and the share price rose 3.32%. In the water sector, the performance of Anhui Huaqi Environmental Protection&Technology Co.Ltd(300929) increased steadily, stopped falling and rebounded, rising by 11.57%, and Jiangsu Jiangnan Water Co.Ltd(601199) rose by 7.48%.
Special research: on the evening of March 15, 2022, the EU carbon tariff (carbon border regulation mechanism, CBAM) was adopted by the EU Council. CBAM aims to operate in parallel with the EU emissions trading system (euets) to reflect and supplement the requirements for imported goods to address the risk of carbon leakage. The expropriation industries include cement, electricity, chemical fertilizer, steel and aluminum. It is mainly possible to increase the cost of China’s cement, steel and aluminum exports and reduce the competitiveness of other products. CBAM will enter the transition period from 2023 to 2025; Officially implemented by 2026. At present, the income distribution of CBAM certificate and international cooperation in carbon pricing are the main topics in the next step. It is expected to negotiate with the European Parliament after reconsideration before July, and strive to complete legislation within 2022.
Investment strategy: Public Utilities: 1. The reform of electricity marketization is promoted, and the electricity price can better reflect the value of supply and demand, cost and environment. The construction cost of new energy continues to decline. New energy operators have “triple” certainty, and the growth rate of “quantity” – scenery installation has high certainty; “Price” – the price of thermal power rises, the green premium is superimposed, and the profit space of green power is opened; “Performance” – this year’s low-cost fans and rush to install sea breeze ensure the performance of next year. 2. The policy promotes the optimal combination of coal and new energy. The policy of Changxie coal price + Changxie electricity price is expected to be implemented, the linkage mechanism is formed, the market-oriented trading of coal and electricity is expanded, and the turning point of thermal power profit appears. 3. The construction of new power system with new energy as the main source will deeply benefit new energy power producers and comprehensive electric energy services. It is recommended to actively transform new energy sources with abundant cash flow, leading thermal power Huaneng Power International Inc(600011) etc; The new energy operation leaders China Three Gorges Renewables (Group) Co.Ltd(600905) , Longyuan Power with capital cost and resource advantages recommend good cash flow, “nuclear power and new energy” two wheel drive China National Nuclear Power Co.Ltd(601985) , and comprehensive power service Suwen Electric Energy Technology Co.Ltd(300982) . Environmental protection industry: 1. High performance and low valuation; 2. The business model is improved, and the operation indicators continue to improve: 3. The stable growth operation attribute appears, and the yield and cash flow indicators continue to improve. Recommend recycled paper as the leading Zhejiang Rongsheng Environmental Protection Paper Joint Stock Co.Ltd(603165) .
Risk warning: the environmental protection policy is not as expected; The growth rate of power consumption decreased; Electricity price reduction; The terminal price of natural gas has been reduced.
