摘要：Jan.-Feb. 2023 Power Data: According to China's National Energy Bureau(NEA), China's power consumption in Feb. 2023 grew 11.0% yoy and that inthe first two months grew 2.3% yoy; generation from power plants abovedesignated scale increased 0.7% yoy during the first two months of the year.Demand growth was likely distorted by a high base effect and a warmerwinter this year, and we expect it to further improve going forward. Bysector, yoy power consumption growth in Jan.-Feb. 2023 was +6.2%/ +2.9%/-0.2%/ +2.7% for the primary industry/ secondary industry/ tertiary industry/residential sector, respectively. We believe the relatively slow demand growthin the first two months was likely due to a high base last year and a warmerwinter this year: 1) in Jan.-Feb. 2022, power consumption in China grew 5.8%yoy (tertiary industry/ residential sector up 7.2%/ 13.1%, respectively); 2)according to the China Meteorological Administration, the temperature in Jan.and Feb. was generally warm and dry, and the avg. temperature was 1.6℃/0.4℃ higher in these two months, respectively, leading to less power demandfor heating. Going forward, we believe power demand is likely to pick up asthe high base effect should dissipate and industrial activity is showing signsof recovery. China Electricity Council expects power demand to grow byaround 6% yoy in 2023.New energy output maintained high growth, while thermal outputgrowth turned negative, potentially due to squeezing effect. Bygeneration source, in Jan.-Feb. 2023, output growth of hydropower andthermal power turned negative, that of nuclear power slowed down, and thatof new energy accelerated. More specifically, during the first two months thisyear, output from wind increased by 30.4% yoy, compared with negativegrowth in the same period last year, while solar output was up 9.3% yoy, 2.8ppts more than the growth recorded in the same period last year. We believesuch high growth was likely due to both better wind and solar resources so farthis year and the grid connection of a relatively large amount of new energycapacity concentrated at the year end. In terms of hydropower, outputdeclined 3.4% yoy in Jan.-Feb. 2023, potentially due to lower water reserveand less rainfall compared with the same period last year - however, output inJan.-Feb., which is the dry season, tends to have limited impact on the wholeyear's output, and it remains to be seen if water conditions can improve in therainy season this year. For thermal power, output dropped 2.3% yoy inJan.-Feb. 2023, compared with growth of 4.3% yoy during the same periodlast year - this is likely due to the squeezing effect from new energy outputwhen power consumption growth was tepid.Investment suggestion: We maintain "Outperform" for the sector on thegrowth opportunities brought by China's power system transformation for boththermal and renewables IPPS. Among thermal IPPs under transformation, werecommend CPID (02380 HK, "Buy", TP: HK$4.90), and CRP (00836 HK,"Buy', TP: HK$19.54); among renewables IPPs, we recommend DTR (01798HK, "Buy", TP: HK$3.34).Risks: Delay in new energy project roll-out; soaring coal prices;higher-than-expected raw material costs; lower-than-expected powerdemand; unfavourable changes in regulations and policies for IPPs.

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