Guoxin Securities·2026-01-20 00:45Investment Rating - The report maintains an "Outperform" rating for the public utility and environmental sectors [6][8]. Core Views - The report highlights that coal and electricity prices are declining simultaneously, which is expected to maintain reasonable profitability for thermal power companies. Recommendations include major thermal power companies such as Huadian International and Shanghai Electric [4][20]. - Continuous government policies supporting the development of renewable energy are anticipated to lead to stable profitability in renewable power generation. Recommended companies include Longyuan Power, Three Gorges Energy, and regional offshore wind power companies [4][20]. - The report notes that the growth in installed capacity and power generation will offset the downward pressure on electricity prices, with nuclear power companies expected to maintain stable profitability. Recommended companies include China Nuclear Power and China General Nuclear Power [4][20]. - The report emphasizes the defensive attributes of hydropower stocks in a global interest rate decline environment, recommending Jiangsu Yangtze Power as a stable and growth-oriented hydropower leader [4][20]. - The environmental sector is entering a mature phase, with significant improvements in free cash flow. The report suggests focusing on "utility-like investment opportunities" in the environmental sector, recommending companies such as China Everbright Environment and Shanghai Industrial Holdings [21]. Summary by Sections Market Review - The Shanghai Composite Index rose by 0.57%, while the public utility index increased by 0.06% and the environmental index by 0.27%. The relative returns for public utilities and environmental sectors were 0.63% and 0.84%, respectively [13][22]. Important Events - Shanxi Province initiated a bidding process for the 2026 incremental renewable energy project mechanism, with a total bidding scale of 9.576 billion kWh, including 3.527 billion kWh from wind power and 6.049 billion kWh from solar power. The bidding price range is set between 0.2 and 0.32 yuan/kWh [2][14]. Special Research - The report outlines that over 26 cities in China have raised water prices in 2025, with adjustments primarily between 10% and 30%. The report emphasizes the necessity of price adjustments due to rising costs faced by water supply companies [3][17][19]. Investment Strategy - The report recommends various companies across different sectors, including thermal power, renewable energy, nuclear power, hydropower, and environmental services, based on their expected performance and market conditions [4][20][21].