Dynamic tax reduction in the hottest power industr

Dynamics of the power industry: tax reduction is beneficial to the power generation side, and fee reduction provides space for price reduction

the reduction of value-added tax rate gives priority to thermal power enterprises

from the perspective of value-added tax reduction, if we assume that the price with tax remains unchanged after the reduction of value-added tax, in fact, it is equivalent to raising the price without tax, which is good for power enterprises. Although there is basically no input deduction for hydropower enterprises, and the dividends from the reduction of value-added tax rate are fully enjoyed by enterprises, because the net profit margin of hydropower enterprises basically reaches 30%, the change of 3 percentage points has less than 10% impact on the company's performance. For thermal power enterprises, assuming that the tax inclusive price of upstream coal remains unchanged and the tax exclusive price of coal rises due to changes in tax rates, then% of the dividends from the reduction of thermal power value-added tax rate will be lost due to the reduction of input deduction. However, since the profits of thermal power enterprises have been at a low point in recent years, we calculate that even if the input deduction is reduced, the performance of thermal power enterprises will still be thickened by 20% - 50%

the average electricity price of general industry and Commerce will be reduced by another 10%, which is expected to be dominated by the reduction of electricity surcharges and the transfer of dividends in the electricity value-added tax link.

the report proposes that the average electricity price of general industry and Commerce will be reduced by another 10%. In addition to increasing market-oriented electricity and cleaning up electricity price surcharges, it is likely to transfer part of the dividends from the decline of value-added tax in the power industry to the space of electricity price reduction. Considering that the construction fund for major water conservancy projects will expire at the end of 19, and the clearing of non electricity link charges in the electricity price is also in line with the national policy guidance, we judge that the reduction of electricity surcharge is expected to be dominated by the construction fund for major water conservancy projects and the late support fund for large and medium-sized reservoir resettlement. Assuming that the two funds are reduced by 50% each, 0.45 points of electricity price space will be released, which should be about 30.6 billion yuan. In the process of electricity price reduction in 2018, after the national development and Reform Commission required the value-added tax rate of the power industry to be adjusted from 17% to 16%, the electricity price space freed up by the reduction of the tax inclusive transmission and distribution electricity price level of provincial power enterprises, the reduction of government funds and additional standards, and the one-time refund of the ending tax allowance, all of which are used to reduce the general industrial and commercial electricity price. We estimate that the value-added tax rate decreased by 3 points, and the corresponding value-added tax dividend on the power side is about 40 billion yuan. The space required for this price reduction is about 72 billion yuan, which can basically be met by reducing fees and taxes

the power supply and demand pattern in Hubei Province is less affected by UHV, and the superposition of Menghua railway is put into operation. It is recommended that Hubei energy and Changyuan power

due to the influence of policies such as coal power de capacity, the production progress of supporting power points of UHV lines packaged with thermal power + wind and solar power is generally not as expected. The power supply and demand pattern in Hubei Province is less affected by UHV, and the utilization hours of thermal power are expected to improve. In addition, according to our calculation, Shaanxi coal has a good economy from Menghua railway to Hubei, Hunan and Jiangxi; Inner Mongolia coal to Hubei and Hunan has a certain economic full-automatic concrete pressure testing machine, which is mainly applicable to the compressive strength test of cement, concrete, refractories, bricks and other materials and other pressure tests within the range of 0.2000kn It is one of the main testing equipment of building materials, construction engineering, quality supervision, measurement and testing, scientific research institutions and other units, but due to the long haul distance to Jiangxi, it lacks cost advantages. Considering that the reduction of fees and taxes is expected to improve the profitability of power companies, coupled with the expected improvement in the utilization hours of thermal power in Hubei and the expected decline in coal prices caused by the operation of Menghua railway, we mainly recommend Hubei energy and Changyuan power

recently, the 2019 government work report was officially released, which involves three aspects: 1. The value-added tax of manufacturing and other industries was reduced, and the tax rate was reduced from 16% to 13%; 2. We will deepen the reform of electricity marketization, clear up additional charges for electricity prices, reduce the cost of electricity in manufacturing, and reduce the average electricity price of general industry and Commerce by another 10%; 3. Promote the clean utilization of coal and speed up the solution of the consumption of wind, light and hydropower

the reduction of value-added tax rate gives priority to thermal power enterprises

from the perspective of value-added tax reduction, if we assume that the tax included electricity price remains unchanged after the reduction of value-added tax, in fact, it is equivalent to raising the tax excluded electricity price, which is good for power enterprises. Although there is basically no input deduction for hydropower enterprises, and the dividends from the reduction of value-added tax rate are fully enjoyed by enterprises, because the net profit margin of hydropower enterprises basically reaches 30%, the change of 3 percentage points has less than 10% impact on the company's performance. For thermal power enterprises, assuming that the tax inclusive price of upstream coal remains unchanged and the tax exclusive price of coal rises due to changes in tax rates, then% of the dividends from the reduction of thermal power value-added tax rate will be lost due to the reduction of input deduction. However, since the profits of thermal power enterprises have been at a low point in recent years, we calculate that even if the input deduction is reduced, the performance of thermal power enterprises will still be thickened by 20% - 50%. According to the conservative calculation results, compared with the performance in 2018 (taking the consensus expectation of Wande), thermal power enterprises generally show better performance elasticity due to the influence of the base number, while the performance elasticity of steel plants in hydropower enterprises that do not take goods actively ranges from 4% to 7%. If the tax free coal price remains unchanged, the reduction of value-added tax will bring higher performance flexibility to thermal power enterprises

the average electricity price of general industry and Commerce will be reduced by another 10%, which is expected to be dominated by the reduction of electricity surcharges and the transfer of dividends in the electricity value-added tax link.

the report proposes that the average electricity price of general industry and Commerce will be reduced by another 10%. In addition to increasing market-oriented electricity and cleaning up electricity price surcharges, it is likely to transfer part of the dividends from the decline of value-added tax in the power industry to the space of electricity price reduction. At present, China's electricity price surcharge mainly includes the previously reduced major water conservancy project construction fund and the late support fund for large and medium-sized reservoir resettlement (about 0.4 points and 0.5 points), renewable energy surcharge (1.9 points), agricultural loan repayment fund (some provinces have been incorporated into the transmission and distribution electricity price, about 2 points) and cross subsidies. Considering that the construction fund for major water conservancy projects will expire at the end of 19, and the clearing of non electricity link charges in the electricity price is also in line with the national policy guidance, we judge that the reduction of electricity surcharge is expected to be dominated by the construction fund for major water conservancy projects and the late support fund for large and medium-sized reservoir resettlement. Assuming that the two funds are reduced by 50% each, 0.45 points of electricity price space will be released, which should be about 30.6 billion yuan. In the process of electricity price reduction in 2018, after the national development and Reform Commission required the value-added tax rate of the power industry to be adjusted from 17% to 16%, the electricity price space freed up by the reduction of the tax inclusive transmission and distribution electricity price level of provincial power enterprises, the reduction of government funds and additional standards, and the one-time refund of the ending tax allowance, all of which are used to reduce the general industrial and commercial electricity price. We estimate that the value-added tax rate decreased by 3 points, and the corresponding value-added tax dividend on the power side is about 40 billion yuan. The space required for this price reduction is about 72 billion yuan, which can basically be met by reducing fees and taxes

the consumption of clean energy continues to improve

in terms of the consumption of clean energy such as wind, light and hydropower, with the start of the assessment of the renewable energy quota system, the willingness of superimposed electricity to consume clean energy has increased, and the phenomenon of abandoning wind, light and water in China has significantly improved in recent years. In 2018, China's wind rejection rate was 7%. Guodian expects that the wind rejection rate within its business scope will drop to 5% in 2019. We believe that this utilization level will become an important support for the healthy and steady development of renewable energy in China

to sum up, we judge: 1. The space for the new round of electricity price reduction is mainly borne by clearing up the relevant electricity surcharge and electricity side value-added tax dividends. Power enterprises will not make additional profits, and power generation enterprises will be less affected; 2. The VAT reduction will bring greater performance flexibility to power enterprises, and most of the dividends from the tax reduction are still expected to flow to power generation enterprises; 3. There should be no risk of further deterioration of the electricity price on the benchmark. 4. The consumption of new energy will continue to improve

according to the analysis of our previous in-depth report, due to the influence of policies such as coal and electricity de capacity, the production progress of supporting power points of UHV lines packaged with thermal power + wind and solar power is generally less than expected. Even by 2020, we expect that the utilization hours of relevant lines will still be mainly hours, and there is still a certain gap compared with full load operation. Under this premise, the squeezing effect of UHV lines on the utilization hours of thermal power units in the consumption end provinces is relatively small compared with the market expectation. According to our measurement, we strive to make breakthroughs in high-end battery diaphragms, new optical films, new flexible screen films, etc; Focus on developing the production of bio based plastic auto parts, bio based plastic packaging products, high-performance PVC building templates, large-diameter and high-strength polyolefin drainage, sewage pipes, etc; Further promote the production and utilization of waterborne polyurethane, solvent-free and other ecological synthetic leather, Jiangsu Province is relatively slightly affected; Shandong Province, Hubei Province and Guangdong Province are less impacted, and the converted utilization hours of thermal power are expected to improve to a certain extent; The converted utilization hours of thermal power in Zhejiang Province and Anhui Province are basically the same. As far as the current calculation results are concerned, the ultra-high voltage power input is mainly "incremental", which has a small impact on the stock of thermal power in the short term. It is worth noting that 6) affected by the expected operation of new lines and the expected increase in the load rate of existing lines, the impact of UHV on the power supply and demand balance of relevant provinces may continue to strengthen after 2020

the Menghua railway, which is expected to be put into operation in October 2019, will have a great impact on the coal supply and demand pattern in Central China. According to our calculation, Shaanxi coal has a good economy from Menghua to Hubei, Hunan and Jiangxi; It is economical for Inner Mongolia coal to reach Hubei and Hunan, but it lacks cost advantage due to the long transportation distance to Jiangxi. Based on the current thermal power generation data of listed thermal power companies in Hubei Province, combined with the economic calculation of Menghua railway coal transportation, we assume that half of Menghua railway coal comes from Inner Mongolia and half from Shaanxi, and the calculation of profit elasticity is shown in the following table. From the calculation results, the absolute value of net profit improvement of Changyuan power and Hubei energy is relatively large

considering that the reduction of fees and taxes is expected to improve the profitability of power companies, adding that the thermal power in Hubei is less affected by UHV lines, the utilization hours of thermal power are expected to improve, and the coal price is expected to drop due to the operation of Menghua railway, we mainly recommend Hubei energy and Changyuan power

Hubei energy, on the one hand, as a comprehensive energy development platform for thermal power, thermal power, coal, oil and gas transmission businesses under the Three Gorges group, is also a comprehensive energy security platform for the development of nuclear power, small and medium-sized hydropower, and new energy in Hubei Province, which has dual advantages. In 2018, the company's water and electricity inflow was low, which was superimposed on the high coal price throughout the year, resulting in poor performance of the company. We believe that with the production of projects under construction, the contribution of overseas layout to investment income, and the production of Menghua railway, the company's coal and thermal power sector is beneficial to the landing. Combined with the steady growth of the company's new energy installation, the natural gas sector has more development potential, the stable performance of financial investment and other factors, the company's performance is expected to hit the bottom and rebound. We predict that the operating revenue of the company from 2018 to 2020 will be 12.078 billion, 15.163 billion and 17.086 billion respectively, and the net profit attributable to the parent company will be 1.865 billion, 2.151 billion and 2.76 billion yuan respectively, with the corresponding EPS of 0.29, 0.33 and 0.42 yuan respectively, maintaining the "buy" rating

as the power operation platform of the national energy group in Hubei Province, the main thermal power units of Changyuan power are located in the load center of Hubei Province, and the utilization hours are relatively guaranteed. We believe that as the Menghua railway is put into operation, the overall environment of superimposed coal supply and demand is improving, the company's fuel cost is expected to decline significantly, and its performance is expected to hit the bottom and rebound. We predict that the operating revenue of the company from 2018 to 2020 will be 6.378 billion, 5.974 billion and 5.920 billion respectively, and the net profit attributable to the parent company will be 209 million, 370 million and 674 million yuan respectively, with corresponding EPS of 0.19, 0.33 and 0.6 respectively