Zacks Investment Research downgraded Datang International Power Generation (DIPGY) to a Zacks Rank #5 (Strong Sell) on Apr 4, 2013.
Why the Downgrade?
Datang International reported its year 2012 financial results on Mar 26, 2013. In local currency, the company’s net income more than doubled with earnings per share showing a hike of 106.7% year over year. Operating revenue grew 7.2% year over year.
Of the total expense, a decline in costs related to fuel used for power and heat generation, roughly 50% of total revenue, was a sign of relief. On the other hand, expenses related to fuel for coal sales, repairs, salaries and other expenses all increased in the year, resulting in an overall increase of 2% in total operating costs.
Increase of 21% in finance costs in the year also impacted results badly. Also, income tax expenses grew a whopping 104% year over year. For the year 2013, management anticipates that slowdown in domestic economic growth will impact its performance during the year.
A combination of all these factors has brought down earnings estimates for Datang International in the last 30 days. The Zacks Consensus Estimate for 2013 has gone down by 9.2% to $1.090 while for 2014, the estimate plummeted 12.0% to $1.32.
Other Stocks to Consider
Datang International is a China-based $5.9 billion electric utility. Other stocks to watch out for in the industry are Brookfield Infrastructure Partners L.P. (BIP), Pike Electric Corp (PIKE) and Empresa Nacional de Electricidad S.A. (EOC), each holding a Zacks Rank #1 (Strong Buy).
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