Investment Rating - The report maintains an "Outperform" rating for the power and utilities sector based on industry valuation levels, earnings growth expectations, and development prospects [7][5]. Core Insights - As of February 25, 2026, the power and utilities index outperformed the market, with a monthly increase of 2.05%, surpassing the Shanghai and Shenzhen 300 index by 1.42 percentage points [12][5]. - The sub-industry performance for the month ranked as follows: Environmental and Water Services (4.81%), Other Power Generation (2.80%), Thermal Power (2.33%), Gas (0.62%), Grid (0.41%), Hydropower (-0.37%), and Heating or Others (-2.36%) [13][5]. - The report suggests a "barbell strategy" for asset allocation in the power sector, focusing on stable, high-dividend thermal power companies for defensive positions and exploring opportunities in virtual power plants and controllable nuclear fusion for aggressive investments [7][5]. Market Review - The power and utilities index showed strong performance relative to the market, with a notable increase in various sub-sectors [12][5]. - The report highlights the recovery in thermal coal prices, with northern port prices reaching 715 RMB/ton, a monthly increase of 2.88% and a year-to-date increase of 3.62% [16][6]. - The report notes extreme weather conditions leading to supply-demand mismatches, with U.S. natural gas prices rising significantly in January 2026, while China's LNG prices saw a decline in February 2026 [21][6]. Industry Dynamics - The State Council issued an implementation opinion on improving the national unified electricity market system, aiming for a fully established market by 2035 [33][7]. - The Southern Power Market has accelerated reforms, achieving 100% signing of inter-provincial medium- and long-term transactions and introducing virtual power plants into the market [33][7]. - The report emphasizes the significant growth in green electricity trading in the Southern region, with a 3.87-fold increase in trading volume in 2025 compared to previous years [31][7]. Company News - The report includes updates on various companies, such as the successful merger and restructuring of Inner Mongolia Huadian and the completion of significant milestones in nuclear power projects by China Nuclear Power [38][7]. - It also mentions the rebranding of Jilin Electric Power Co., Ltd. to State Power Investment Corporation Green Energy Co., Ltd. [38][7].

1. Report Industry Investment Rating No information provided regarding the industry investment rating in the given content. 2. Core Viewpoints of the Report - In the first half of February 2026, the REITs market experienced a decline in trading volume and a price correction. The energy and transportation sectors were the only two to achieve positive returns, while the utility sector had the largest decline. The spread between REITs and the 10 - year Treasury bond widened, and the valuation of both property and concession - based REITs generally decreased, although still at relatively high historical levels [4]. - The offline new - share subscription income recovered. Huaxia Zhonghe Clean Energy REIT rose 28% on its first trading day, bringing a good start to the primary market in 2026 [4]. - In terms of queuing projects, Beijing Changbao REIT responded to the first - round feedback, and two infrastructure REITs received inquiry letters. Four new commercial real - estate REITs were accepted in the first half of February [4]. - Nanfang Runze IDC plans to conduct an expansion, and four projects will be解禁 in late February and early March [4]. 3. Summary by Relevant Catalogs 3.1 Pre - holiday Trading Volume Declined and the Spread between REITs and Treasury Bonds Widened - **Market Performance**: In the first half of February 2026, the A - share market was sluggish. The CSI REITs Total Return Index fell 0.5%, and its daily average turnover rate dropped to the lowest level in the past six months. The 10 - year Treasury bond yield continued to decline, reaching 1.79% as of February 13 [9]. - **Sector Performance**: The energy sector led the gain (+1.29%) due to the policy of "building a unified power market" and the listing of the first energy REIT in the new year. The transportation sector had a seasonal recovery (+0.24%) driven by Spring Festival travel demand. The utility sector had the largest decline (-1.13%), and the declines of other sectors were within 1% [14]. - **Individual Bond Performance**: Sinotrans Warehouse REIT led the gain (+3.71%), and Huitianfu Shanghai Real Estate REIT followed (+3.12%) after the expansion announcement. Huaxia Jinyu Zhizao Gongchang REIT had the largest decline (-4.68%) due to the impact of the restricted - share lifting [18]. - **Dividend Yield and Spread**: As of February 13, the dividend yield of concession - based REITs was 8.56% (79% quantile), and that of property - based REITs was 4.51% (55% quantile). The spread between property - based REITs and the 10 - year Treasury bond yield widened to 2.71% (66% quantile), with the consumption - type REITs showing the most significant recovery [24][33]. - **Valuation and IRR**: The P/NAV of property - based REITs was 1.27X (82% quantile), and the P/FFO of concession - based REITs was 13.28X (51% quantile). The IRRs of both property - based and concession - based REITs increased compared to the previous period, reaching 3.8% and 5.0% respectively [42][48]. 3.2 Offline New - Share Subscription Income Recovered, and Zhonghe Energy Rose 28% on Its First Day - **Issuance Situation**: As of February 13, 2026, there were 79 listed REITs in Shanghai and Shenzhen, with a total market value of 229.6 billion yuan. There was no new issuance in the first half of February, and Huaxia Zhonghe Clean Energy REIT was listed on February 2 [50]. - **First - day Performance**: Huaxia Zhonghe Clean Energy REIT rose 28.2% on its first trading day, and its cumulative increase in the first four days was 26.3% [55]. - **New - share Subscription Income**: After two consecutive losses in offline new - share subscriptions, the subscription of Huaxia Zhonghe Clean Energy REIT brought positive returns. The offline cash accounts of 10 million yuan, 30 million yuan, and 100 million yuan achieved returns of 0.83 million yuan, 2.48 million yuan, and 8.27 million yuan respectively, with a subscription yield of 0.08% for funds below 100 million yuan [57]. 3.3 Beijing Changbao Responded to the First - Round Feedback, and Four New Commercial Real - estate Projects Were Added - **Infrastructure REITs**: There are currently 11 infrastructure REITs in the pipeline for initial issuance and 2 for expansion. Beijing Changbao REIT responded to the first - round feedback, with its total valuation decreased by 3.19% to 820 million yuan. Boshi Shandong Tietou Road and Bridge REIT and Huatai Three Gorges Clean Energy REIT received inquiry letters [63][64]. - **Commercial Real - estate REITs**: As of February 13, 2026, there were 12 commercial real - estate REITs in the pipeline for initial issuance, with an average planned fundraising amount of 3.476 billion yuan. Four new projects were accepted in the first half of February [69]. 3.4 Nanfang Runze IDC Plans to Conduct an Expansion, and Four Projects Will Be解禁 Soon - **Expansion Plan**: Nanfang Runze Data Center REIT announced an expansion plan to purchase the A - 7 and A - 8 data centers of Runze (Langfang) International Information Port [86]. - **Restricted - share Lifting**: Four projects, including Guotai Haitong Jinan Heating REIT, Huaxia Jinyu Zhizao Gongchang REIT, Huitianfu Jiuzhoutong Medicine REIT, and Guotai Haitong Lingang Industrial Park REIT, will have their restricted shares lifted from late February to early March [86].

Core Viewpoint - The A-share market experienced fluctuations on September 26, with the electricity sector rising against the trend, particularly driven by wind power concepts and related ETFs showing gains [1] Group 1: Market Performance - The three major A-share indices showed a downward trend, while the electricity sector saw an increase, with wind power-related ETFs performing well [1] - As of 10:14 AM, the Green Electricity ETF (562550) rose by 0.64%, the Public Utility ETF (159301) increased by 0.43%, and the Power Grid Equipment ETF (159326) gained 0.38% [1] - Key stocks in the Green Electricity ETF, such as Jiaze New Energy, reached the daily limit, while Shanghai Electric, Energy Saving Wind Power, Longyuan Power, Gansu Energy, and Solar Energy also saw significant gains [1] Group 2: Industry Insights - At the 2025 New Power System Development Forum, industry experts emphasized the importance of the "14th Five-Year Plan" period for accelerating the construction of a new power system, focusing on high-quality development in the electricity sector [1] - Xiangcai Securities highlighted the accelerated construction of a national unified electricity market, expressing optimism about the revaluation of electricity assets [1] - The firm recommended focusing on three main lines: hydropower assets with stable fundamentals benefiting from the unified electricity market, thermal power assets with improving performance due to cost reductions and favorable supply-demand dynamics, and leading companies with strong operational capabilities and high-quality resource locations in the green electricity sector [1]

Core Viewpoint - The National Development and Reform Commission and the National Energy Administration have issued guidelines for the construction of continuous electricity spot markets, focusing on adapting market mechanisms for the full entry of renewable energy and enhancing system regulation capabilities [1][2]. Group 1: Spot Market Mechanism - The guidelines support local exploration of optimized spot market mechanisms under the full entry of renewable energy, aiming to create time-based price signals that reflect supply-demand relationships and adjustment costs [2]. - As of August 2025, all 26 provincial electricity spot markets in the State Grid operating area have been launched, with five provinces successfully transitioning to formal operations [2]. - The spot market has effectively incentivized both supply and demand optimization, with significant reductions in electricity costs and improved grid regulation capabilities [2]. Group 2: New Market Participants - The guidelines emphasize the need to improve mechanisms for various market participants, encouraging new entities like virtual power plants and smart microgrids to participate in spot market competition [4]. - Challenges faced by emerging market participants in provincial spot market trading necessitate the development of universal pricing models to enhance market engagement [4][5]. - The guidelines allow new entities to participate in pricing, which can lower entry barriers for small users and help manage negative electricity prices effectively [5]. Group 3: Auxiliary Services and Capacity Assurance - The guidelines propose the establishment of auxiliary service market systems tailored to local conditions, particularly in regions with high renewable energy installations [6]. - Experts highlighted the need for a capacity compensation mechanism to ensure long-term system capacity, addressing the challenges posed by the declining investment interest in traditional power sources due to the rise of renewable energy [7]. - The guidelines aim to balance the investment expectations of renewable and traditional power sources, ensuring the stability and security of the electricity system [7][8]. Group 4: Key Policy Directions - The nine key directions outlined in the guidelines include optimizing the spot clearing mechanism, enhancing participation mechanisms for new entities, and establishing reliable capacity compensation mechanisms [8]. - The guidelines and expert recommendations align towards constructing a market operation system that accommodates a high proportion of renewable energy, ensuring optimized resource allocation and stable supply [8].

Group 1 - Xi Jinping emphasizes the need to promote the healthy and high-quality development of the private economy, addressing prominent issues faced by private enterprises and encouraging entrepreneurs to remain resilient [1] - The People's Bank of China plans to implement a moderately loose monetary policy, ensuring liquidity remains ample and aligning social financing and money supply growth with economic growth and price level expectations [1] Group 2 - Li Qiang calls for a robust push towards green and low-carbon industrial transformation, focusing on enhancing ecological diversity and stability while optimizing land development and protection [2] Group 3 - Southbound funds recorded a net purchase of HKD 35.876 billion on August 15, marking a historical high for single-day net purchases, with Xiaomi Group and Alibaba leading the inflows [3][4] - The top ten stocks with the highest net inflows from southbound funds include Xiaomi Group (HKD 31.43 billion) and Alibaba (HKD 27.26 billion) [3] Group 4 - The first batch of total control indicators for rare earth mining and separation for 2025 has been issued to China Rare Earth Group and Northern Rare Earth, although not publicly disclosed [4] Group 5 - The Shanghai Composite Index reached a peak of 3704.77 points, approaching the 3731.69 points high from February 18, 2021, marking a significant ten-year high [5][6] - Historical analysis shows that after reaching a ten-year high, the Shanghai Composite Index typically maintains a trend of oscillating upward over an extended period [6] Group 6 - Reports suggest that polysilicon companies may implement monthly production and sales restrictions starting in September, with a total annual capacity control of 2 million tons for 2026 [7] - The average transaction price for n-type polysilicon has increased from CNY 34,400 per ton in late June to CNY 47,400 per ton, reflecting a nearly 37.8% increase [7] Group 7 - The Shanghai Electric Power Company successfully executed a demand response call for virtual power plants, achieving a maximum response load of 1.1627 million kilowatts, setting a new record [13] - Analysts recommend focusing on hydropower and thermal power stocks that are expected to benefit from the ongoing construction of a unified national electricity market [13]

Core Insights - The construction of a national unified electricity market in China is a key task for deepening electricity system reform and supporting the establishment of a new type of power system [1][2] Group 1: Market Progress - In the first half of this year, cross-provincial electricity trading volume exceeded 670 billion kilowatt-hours, indicating that for every four kilowatt-hours traded in the electricity market, one is achieved through cross-provincial transactions [1] - By 2024, the market-oriented trading volume is expected to reach 6.18 trillion kilowatt-hours, accounting for approximately 63% of the total electricity consumption in society [1] Group 2: Market Mechanisms - Significant breakthroughs have been made in optimizing the allocation of electricity resources across a larger area, including the establishment of a normalized trading mechanism between the State Grid and Southern Grid, achieving "soft interconnection" for electricity trading [1] - The southern regional electricity market has initiated continuous settlement operations, allowing five provinces to achieve "unified trading and competitive bidding" [2] Group 3: Market Coverage and Rules - The electricity spot market is on the verge of achieving near-complete coverage, with 25 provincial markets already conducting spot trading, six of which have officially commenced operations [2] - A unified basic rule system for the electricity market has been established, consisting of fundamental operational rules and supporting regulations for medium-long term, spot, and ancillary service trading [2]

Investment Rating - The industry investment rating is maintained at "Overweight" [2][9][40] Core Viewpoints - The recent release of the renewable energy power consumption responsibility weight for 2025 is favorable for the consumption of new energy [7] - The report highlights the acceleration of the construction of a national unified electricity market, which is expected to lead to a revaluation of electricity asset values [9][40] - The report recommends focusing on three main lines: hydropower stocks with stable fundamentals, thermal power stocks with improving performance under cost reductions, and leading companies with strong operational capabilities in the green electricity sector [9][40] Industry Performance - The public utility sector (Shenwan) fell by 1.37% this week, underperforming the CSI 300 index by 2.46 percentage points [4] - Over the past 12 months, the public utility sector has seen a relative return of -17% compared to the CSI 300 [3] Key Data Tracking - The spot coal price has slightly increased week-on-week, with inventory levels rising [5] - Domestic natural gas prices have decreased slightly, with the LNG ex-factory price at 4455 RMB/ton, down 0.11% week-on-week [6] - The inflow to the Three Gorges Reservoir has significantly decreased, with the average inflow down 41.99% week-on-week [6] Investment Recommendations - The report suggests investing in companies such as Changjiang Hydropower, Huaneng Hydropower, Huaneng International, Jingneng Power, and Funiu Co., Ltd. due to their strong operational capabilities and favorable resource locations [9][40]

Core Viewpoint - The recent heatwave across China has led to a significant increase in electricity demand, creating a favorable environment for the power sector, with several stocks experiencing substantial gains [1][11]. Group 1: Electricity Demand and Market Performance - National maximum electricity load reached 1.465 billion kilowatts on July 4, an increase of 150 million kilowatts year-on-year [1][11]. - In the East China grid, the load reached 422 million kilowatts, with air conditioning accounting for 37% of this load [1]. - Several power stocks, including Huayin Power and Shaoneng Co., have seen significant price increases, with Huayin Power rising 116.8% since April [4][6]. Group 2: Company Performance - Huayin Power reported a revenue of 2.307 billion yuan in Q1, a year-on-year increase of 5.06%, and a net profit of 75.6749 million yuan, up 894.61% [7]. - The company anticipates a net profit of 180 million to 220 million yuan for the first half of the year, a significant increase compared to the previous year [8]. - The increase in profit is attributed to a 7.37% rise in power generation and a decrease in the benchmark coal price by 54.08 yuan per ton [8]. Group 3: Future Outlook - The National Energy Administration has released a new action plan for the construction of a new power system from 2025 to 2027, indicating structural opportunities for the power sector [12]. - Analysts predict a 5% increase in electricity consumption this summer due to high temperatures, which will further boost power generation [12]. - Recommendations for investment focus on hydropower assets, thermal power companies with improving performance, and strong operators in the renewable energy sector [13].