Core Viewpoint - The public utility sector is expected to maintain a stable fundamental outlook through 2026, with a focus on the rebound opportunities in undervalued sectors following style shifts [1][2] Group 1: Industry Outlook - The electricity sector is entering the second half of reforms, with spot market expansion and power source market entry as key themes [2] - The implementation of the "136" document marks the full market entry of China's renewable energy generation, leading to a surge in new energy projects [2] - The current electricity supply-demand structure is transitioning to a more relaxed phase, influenced by weak electricity demand and a significant increase in coal power generation [3] Group 2: Investment Opportunities - The peak of the power source investment cycle may have passed, with asset consolidation presenting potential investment opportunities [4] - The energy sector is witnessing a trend of asset restructuring focused on core business optimization and energy transition [4] - The investment in traditional coal power remains robust, while new energy investments are showing signs of decline [5] Group 3: Power Source Categories - In a context of sufficient electricity supply, energy prices are expected to continue to decline, while auxiliary service prices may rise [5] - Coal power is projected to experience a bottoming out of profit cycles, with high dividend potential [5] - Nuclear power is anticipated to grow rapidly, with an increasing market share, despite facing downward price pressures [6] Group 4: Policy and Market Dynamics - The recent policies from the National Development and Reform Commission aim to enhance the commercial model for green electricity and integrate consumption policies [6] - The remaining capacity for hydropower development is limited, while nuclear power is expected to see a significant increase in installed capacity post-2027 [6]

Core Viewpoint - The report from Kaiyuan Securities indicates that during the "14th Five-Year Plan" period, a supply-demand pattern of "abundant electricity generation, tight electricity supply" is expected, with comprehensive electricity prices likely to stabilize [1][2]. Group 1: Electricity Demand and Pricing - From January to November 2025, the overall performance of dividend-style sectors has been poor, while electricity demand has maintained steady growth, with total electricity consumption in China reaching 8.62 trillion kilowatt-hours, a year-on-year increase of 4.8% [2]. - The price of thermal coal has bottomed out and is expected to drive a rebound in electricity prices. From the end of 2023 to mid-2025, thermal coal prices have been on a downward trend, but began to rebound in July 2025, with the monthly clearing price in Jiangsu's electricity market reaching 395.60 yuan per megawatt-hour, an increase of 82.80 yuan per megawatt-hour [3]. Group 2: Hydropower and Nuclear Power - Hydropower operations remain stable, with major river basin water levels holding steady. The net interest margin for hydropower has increased by 69 basis points compared to the average from May 2023 to April 2024, indicating long-term allocation value in a low-interest-rate environment [4]. - The marketization ratio of nuclear power is gradually increasing, with the marketization electricity volume cap for Lingao and Yangjiang nuclear power plants set at 31.2 billion kilowatt-hours in 2026, a 14.3% increase from 2025. The impact of natural uranium price fluctuations on operators is minimal [5]. Group 3: Green Energy and Grid Equipment - The implementation of policy uncertainties regarding green electricity income has been established, with market reforms entering a deeper phase. The wind power tax rebate has been reduced, indicating that the policy bottom has been reached [6]. - Investment in domestic grid equipment shows structural differentiation, with cumulative procurement of State Grid transmission and transformation equipment reaching 78.747 billion yuan, a year-on-year increase of 19.6%. The cumulative procurement for ultra-high voltage equipment reached 20.319 billion yuan, a year-on-year increase of 13.3% [7].

Overall Viewpoint - Shandong and Guangdong provinces have issued implementation details for Document No. 136, attracting ongoing attention from the capital market regarding policy developments in more provinces. The core of the policy is to reflect power supply and demand through market-oriented electricity prices, achieving a reasonable installed capacity for renewable energy. The mechanism for electricity volume and pricing aims to stabilize the financing capability of renewable energy projects [2]. Shandong and Guangdong Details - Shandong's details state that the mechanism electricity price for existing projects is based on the coal-fired benchmark electricity price, with a mechanism electricity volume cap referencing the non-marketization rate of other provinces. The execution period is based on a reasonable full life cycle hour. For incremental projects, the bidding declaration sufficiency must not be less than 125%, and the mechanism electricity price must not exceed the bidding cap. The setting of the mechanism electricity price for existing projects is considered friendly, with potential optimization for mechanism electricity volume. The electricity price for incremental projects will depend on current spot prices, with lower prices for solar and relatively better prices for wind energy, leading to more intense bidding in the future [2]. - Guangdong's details apply only to incremental projects, with a mechanism electricity volume declaration cap not exceeding 90%. The execution period is 14 years for offshore wind and 12 years for other projects, with no mechanism electricity price applied after expiration. This detail stabilizes expectations for new renewable energy installations and is favorable for offshore wind [2]. Investment Aspects - In the photovoltaic sector, production and industry chain prices have declined since May, with the market recognizing weak domestic photovoltaic demand for 2025 and 2026. Some companies' stock prices have returned to mid-2024 levels. Although supply-side policies for 2024 are below expectations, the policy direction remains unchanged. Some second- and third-tier companies are seeking to divest equity, and bank credit limits are gradually tightening, indicating a trend. A rebound opportunity may arise when new supply-side policies are introduced or when companies undergo a certain level of clearing [3]. - In the wind power sector, due to its favorable output curve and relatively good economic viability, there are expectations for sales recovery of wind power stations following the issuance of detailed policies under Document No. 136. Additionally, there is potential for profit recovery in wind turbine manufacturing [3]. - In the energy storage and power equipment sector, attention should continue to focus on high growth in large-scale storage in Europe, industrial and commercial storage in Southeast Asia, and off-grid storage in Africa by 2025. Future focus will be on changes in grid demand structure driven by virtual power plants and integrated cloud distribution [3].