Zhi Tong Cai Jing·2025-08-14 03:19Core Viewpoint - UBS downgraded China Electric Power Holdings (00002) from "Buy" to "Neutral" and reduced the target price from HKD 74 to HKD 70 due to adverse overseas factors impacting the company's short-term fundamentals [1] Group 1: Business Performance - The report indicates that while China Electric's Hong Kong operations remain strong and predictable, there is profit pressure from Australia and mainland China affecting the performance in the first half of 2025 [1] - The underperformance of non-local businesses may limit the expected profit growth for the fiscal year 2025, leading to a forecast of flat annual dividends per share, previously expected to grow by 3% [1] Group 2: Long-term Outlook - UBS maintains a long-term forecast of an average annual dividend growth of 3% from 2026 to 2029, anticipating a gradual return to stable growth once non-local business stabilizes [1] Group 3: Dividend Yield and Market Comparison - The forward dividend yield of 4.8% for China Electric has narrowed to below the historical average by one standard deviation, compared to a 49 basis point yield for the US 10-year Treasury, indicating reduced attractiveness relative to the industry premium of 73 basis points [1] Group 4: Earnings Forecast Adjustments - UBS has adjusted its earnings forecasts for China Electric for 2025 to 2027 down by 11%, 8%, and 7% respectively, reflecting last year's performance and the disappointing results from non-local businesses, particularly in mainland China and Australia [1]