May Power generation has warmed Huadian international and China Resources Power is the first choice for electricity stocks

China Bank International According to the state Grid company news, May output was down 3.54% to 2, 89.72 billion kwh, the decline is comparable to April. 　　Output fell by 5.7% in late May, while early and mid-April fell 3.9% and 0.6% respectively. Electricity generation has warmed in May. Although the National Grid data and the upcoming official statistics of the China Electric Power Companies association may be different in specific numbers, but generally consistent. After adjusting for the holiday factors, we found that the May power generation has been warmed up. As a result of the Wuyi Labor Day and the Dragon Boat Festival holiday, compared with last year, this year, in May, the middle and late April respectively reduced one working day, increased a working day and reduced two working days. 　　Considering a reduction of two working days by May, the adjusted May output fell by about 2.5% per cent year-on-year, down less than 3.55% in April. Geographically, the eastern grid performance is good, generating a small decline of 2.8%, and energy-intensive industries in the Northwest region has fallen 9.4%. 　　According to the situation of provinces and cities, Beijing-Tianjin-Tangshan, Anhui, Jiangxi, Sichuan to achieve positive growth, and Shanxi, Qinghai, Ningxia and Inner Mongolia, there are double-digit decline. 09 January-May, the country's electricity output fell 3.2% year-on-year. We believe that the warming trend is still continuing, in line with the growth of the manufacturing purchasing managers index. As demand for electricity fell in the first half of 09, we lowered the annual demand growth forecast from 4% to 2.7% (Thermal power growth of 0.9%, hydropower growth of 9.5%). We believe that future trends will be highly dependent on the recovery of high-energy-consuming industries, such as aluminium and steel. 　　From the 3 quarter onwards, growth trends will occur in coastal areas and gradually move inland. In our view, the weak coal market will create a good business environment for independent power generation companies in the coming summer. May, the power plant's coal inventory for 17.3 days, the same period of 10.6 days a year ago. Qinhuangdao coal prices have not risen much, and hang hau prices have fallen below the January level. We maintain a neutral rating for a and h-share independent power generation companies. 　　Huadian International (1071, Buy) and CR Power (0836, Buy) is still our first choice in this section. Run-electricity unit valuation is still lower than the same as the proposed 10:1 proportion of shares, the subscription price of 14 Hong Kong dollars/shares, more than the theoretical price of the shares after a discount of 20.3%, raise capital of about 5.9 billion Hong Kong dollars. 　　The parent company, which owns 65% per cent of the equity, has agreed to subscribe to a proportional subscription of HK $3.9 billion and the parent company will subscribe for the remaining 2 billion Hong Kong dollars if a minority shareholder does not subscribe. In terms of the use of funds, the company only indicated that it would be used to strengthen capital. By the end of 08, the company's total liabilities to the parent company of China Resources Group amounted to HK $5.5 billion, the interest rate was 4.05-5.09%, and the maturity date was 2015-2021 years. Since the Hong Kong dollar interest rate has fallen sharply below this level, it is reasonable to refinance the original liabilities. We estimate that China Resources Group's contribution of 3HK $900 million will be used for debt refinancing, and the rest will be spent on future capital expenditures for coal, renewable energy and efficient coal-fired units. The company announced a capital expenditure plan of HK $40.5 billion for the next three years, and we expect its operating cash flow to be HK $38 billion. Assuming the company issues 424 million new shares (10% of the current issued share capital) and the rest of the situation unchanged, the company's 09-year net debt ratio of expected equity will be reduced from 100% to 73% immediately. Earnings per share will be diluted, with 09 and 10 earnings per share reduced by 4.7% and 8.3% respectively. The current share price is equivalent to 2.16 times times the 09-year market net rate, and we think the valuation is still lower than the average premium level of the unit. We maintain the buying rating for the unit.