Huaneng’s Q1 Above Expectation; Full-Year Outlook and FVE Unchanged

Huaneng reported strong first quarter results with net recurring profit increasing by 39% on the low base last year to CNY 2.9 billion under PRC GAAP, largely driven by a strong recovery in power sales of 30% year over year. This is well above the industry average growth of 21%, mainly due to Huaneng’s high exposure to central and eastern China, where power demand has rebounded after being hit hard by pandemic lockdowns in 2020. However, gross margin is 200 bps lower than last year, mainly due to strong coal prices in the first quarter and a 0.6% year-over-year decline in power tariff. This is generally within our expectation.