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Strong Buy on Huaneng Power

Zacks Equity Research

Zacks Investment Research upgraded Huaneng Power International, Inc. (HNP) to a Zacks Rank #1 (Strong Buy) on Mar 22, 2013. The company with a market capitalization of roughly $14.7 billion is a well-known power producer in the People's Republic of China.

Why the Upgrade?

Huaneng Power reported its financial results for the fourth quarter and year 2012 on Mar 19, 2013. In local currency, the company’s net income in 2012 grew 366.95% year over year while revenue increased marginally by 0.41%. Huaneng Power’s earnings per ADS in 2012 were US$2.48. 

Operating income in the year grew 93.8% year over year as revenue growth was complimented by a year-over-year decline of 6.3% in operating expenses. Fuel costs accounted for roughly 70.8% of the total operating expenses.

Year 2012 has been very beneficial for Huaneng Power on this front as a huge amount of coal was purchased at an affordable price. Fuel cost per unit of electricity sold represented a 7.6% year-over-year decline.

Huaneng Power has been very active in rewarding its shareholders and it does so mainly by paying dividends. The company’s board has proposed to declare a quarterly dividend payment of RMB0.21 per share to its shareholders.

Impressive financial results and anticipation of a better outlook have resulted in an increase in earnings estimate for Huaneng Power. For 2013, the Zacks Consensus Estimate has moved up 8.9% to $4.63 in the last 7 days while for 2014 the estimate has increased by 1.0% to $4.94. Also, we have an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +6.9% for 2013 and +6.7% for 2014.

Other Stocks to Consider

Other stocks to watch out for in the industry are Brookfield Infrastructure Partners L.P. (BIP), Otter Tail Corporation (OTTR) and Pike Electric Corporation (PIKE), each with a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on HNP

Read the Full Research Report on BIP

Read the Full Research Report on PIKE

Read the Full Research Report on OTTR

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