中国公用事业行业-22年下半年展望：将长江基建电力资产提升至OW级

www.jpmorganmarkets.comAsia Pacific Equity Research20 June 2022Equity Ratings and Price TargetsMkt CapPriceRatingPrice TargetCompanyTicker($ mn)CCYPriceCurPrevCurEnd DatePrev End DateCK Infrastructure1038 HK15,391HKD47.95OWN60.00Jun-2349.00Jun-22Power Assets6 HK13,268HKD48.80OWN60.00Jun-2346.90Jun-22CLP Holdings (0002)2 HK23,350HKD72.55NOW63.00Jun-2390.00Jun-22Guangdong Investment270 HK7,521HKD9.03NOW10.00Jun-2313.00Dec-22Source: Company data, Bloomberg Finance L.P., J.P. Morgan estimates. n/c = no change. All prices as of 20 Jun 22.Hong Kong Utilities2H22 outlook. Upgrade CK Infrastructure/ Power Assets to OWHong Kong, ChinaUtilities and EnvironmentalStephen Tsui, CFA AC(852) 2800-8592stephen.tsui@jpmorgan.comBloomberg JPMA STSUI <GO>Alan Hon(852) 2800-8573alan.hon@jpmorgan.comVento Suen(852) 2800-8546vento.suen@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedSee page 40 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.We assume coverage of Hong Kong Utilities with a selective view after the 5% outperformance YTD (-5%, vs HSI -10%). In this report, we identify winners and losers from elevated commodity prices, inflation and exchange rate movements. Our top picks are CK Infrastructure and Power Assets (upgrade to OW), as the pair benefit from inflation in UK/Australia, and we view them as best-positioned amid rising fuel costs and RMB depreciation. Their M&A activities may pick up amid global reopening as well. Conversely, we turn cautious on CLP Holdings/ Guangdong Investment and downgrade them to Neutral, as they face multiple headwinds from higher fuel costs, stiff competition for Australia business (CLP) and slower property sales (GDI). We suggest to long CKI/PAH and short CLP for a three-month horizon.  Upgrade CKI/PAH to OW for four reasons: (1) Rising inflation in UK/Australia will enlarge their revenue and regulated asset bases, and inflationmay linger amid elevated commodity prices. (2) The upcoming reset for UK Power Networks (UKPN) in 2H could be better than feared amid rising interest rates and hefty investment needs for smart grids. (3) Earnings tailwinds from the previous appeal for higher returns on the UK gas/power network will start to come through this year. (4) Global re-opening could boost earnings for their infrastructure assets and spawn more M&A activities. Downgrade CLP/GDI to Neutral. We believe CLP’s earnings headwinds will continue due to: (1) margin squeeze for its thermal power plants across the region from rising fuel costs (ex. HK); and (2) pressure on its Australia business shows no signs of abating, as ret