Shares of Huaneng Power International, a leading Chinese electricity producer, plummeted on Wednesday after the company reported disappointing financial results for the first half of the year, missing market expectations. The stock dropped 6.7% in Hong Kong and 4.5% in Shanghai by midday trading.
Huaneng Power's earnings were impacted by lower electricity prices and intensified competition from renewable energy sources. The company's total on-grid electricity sold by power plants in China declined by 6.2% compared to the previous year. While higher power generation from renewables partially offset the impact, maintenance of plants ahead of the summer season also contributed to the weaker performance.
Analysts expressed concerns over the company's financial results. Citi analysts Pierre Lau and Bella Tian reiterated a "sell" rating, citing higher operating costs in the second quarter and the likelihood of consensus profit projections being revised downward due to potential asset impairment losses in the fourth quarter. Daiwa analysts Dennis Ip and Neal Du also highlighted their worries about declining renewable tariffs and rising curtailment, which could further pressure Huaneng Power's earnings growth.
Looking ahead, the company faces challenges from the ongoing transition towards renewable energy sources and the potential impact on its traditional power generation business. Analysts remain cautious about Huaneng Power's ability to maintain profitability in the face of these industry headwinds.
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