Guoxin Securities·2025-06-04 15:07Market Overview - In May, the Shanghai and Shenzhen 300 Index rose by 1.85%, while the public utility index increased by 2.31% and the environmental index by 3.42%, with relative returns of 0.47% and 4.98% respectively [1][14][21] - The environmental sector saw a rise of 6.83%, with sub-sectors such as thermal power increasing by 2.29%, hydropower by 2.13%, and renewable energy generation by 2.76% [1][21][23] Important Policies and Events - The National Development and Reform Commission and the Energy Administration issued a notice promoting the development of green electricity direct connection, allowing renewable energy sources like wind and solar to supply single users directly through dedicated lines [1][15] - The policy encourages private enterprises to invest, requiring that self-consumed renewable energy should not be less than 60%, with excess electricity fed into the grid not exceeding 20% [1][15] Investment Strategy - The report recommends major thermal power companies such as Huadian International and Shanghai Electric due to expected stable profitability amid declining coal and electricity prices [3][20] - For renewable energy, it suggests leading companies like Longyuan Power and Three Gorges Energy, as well as regional offshore wind power firms like Guangxi Energy and Funiu Co., due to supportive national policies [3][20] - Nuclear power companies like China Nuclear Power and China General Nuclear Power are expected to maintain stable profitability, with recommendations for restructuring entities like State Power Investment [3][20] - High-dividend hydropower stocks like Yangtze Power are highlighted for their defensive attributes in a global interest rate decline environment [3][20] - In the gas sector, companies with geographical advantages such as China Resources Gas and Jiufeng Energy are recommended [3][20] Sector Performance - The environmental sector is entering a mature phase with significant improvements in free cash flow, suggesting a focus on "utility-like investment opportunities" in the sector, recommending companies like China Everbright Environment and Zhongshan Public Utilities [3][20] - The domestic scientific instrument market, valued over $9 billion, presents substantial opportunities for domestic replacements, with a recommendation for Juguang Technology [3][20] - The EU's SAF blending policy is expected to increase demand for raw materials, benefiting the domestic waste oil recycling industry, with a recommendation for Shangaohuan Energy [3][20] - The agricultural biomass power generation sector is seeing cost improvements due to declining straw prices, with a recommendation for Changqing Group [3][20] Key Company Earnings Forecasts - Huadian International (600027.SH) is rated outperform with an expected EPS of 0.62 for 2025, while Longyuan Power (001289.SZ) is also rated outperform with an EPS of 0.85 for the same year [8][20] - Other recommended companies include China Nuclear Power (601985.SH) with an EPS of 0.50 and Yangtze Power (600900.SH) with an EPS of 1.41 for 2025 [8][20]