Citi: The two power companies' reduction in electricity tariffs is a neutral event, maintaining a "Buy" rating on CLP and a "Neutral" rating on HKELECTRIC

AASTOCKS
2025.11.19 02:49

The two power companies announced yesterday (18th) that they will lower the average net electricity tariff starting from January next year. The average net electricity tariff of China Light and Power (00002.HK) will decrease by 2.6% to HKD 1.406 per kWh, while the average net electricity tariff of HKELECTRIC (02638.HK) will drop by 2.2% to HKD 1.633. Citigroup published a research report indicating that the reduction in electricity tariffs by the two power companies is mainly due to the decrease in fuel surcharge, reflecting the decline in coal and liquefied natural gas prices over the past 12 months, which is sufficient to offset the impact of the basic electricity price increase, and is expected to provide an asset return rate of up to 8%.

Since the fuel costs are fully passed on to customers without affecting profitability, the bank views this electricity tariff reduction as a neutral event, maintaining a "Buy" rating for China Light and Power and a "Neutral" rating for HKELECTRIC, with no adjustments to earnings forecasts, and target prices of HKD 76 and HKD 6.6, respectively

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