Huaneng Power International Faces a Tightening Outlook

On January 19 2026, Citi Research issued a significant downgrade for Huaneng Power International Inc. (00902.HK), shifting the rating from Buy to Sell and lowering its target price from HK$7.20 to HK$4.50. The research note cites a projected peak in net profit for 2025, followed by a decline in 2026 and 2027, driven by tariff reductions and limited upside in coal‑fuel costs.

Key Points from the Citi Report

  • Net Profit Forecast: Citi expects the company’s earnings to peak in 2025, after which net profit will fall in 2026 and 2027.
  • Tariff Impact: A larger‑than‑expected tariff cut is a central concern, eroding revenue margins across the power‑generation portfolio.
  • Coal‑Cost Dynamics: While the price of coal per unit is projected to stay flat or slightly decline, the lack of significant cost reductions limits potential margin improvement.
  • Return on Equity: The 2025 ROE is estimated at 9.8 %, the highest level since 2015, but the outlook for subsequent years is less favorable.
  • Target Price Reduction: The brokerage trimmed its price target for Huaneng from HK$7.20 (RMB 10) to HK$4.50 (RMB 6.25), reflecting the expected earnings drag.

Company Context

Huaneng Power International operates as an independent power producer and renewable electricity provider in China. Its services span electricity transmission, distribution, and power transformation. As of January 19 2026, the share closed at HK$5.85, with a 52‑week range of HK$3.95 to HK$8.26. The market capitalization stands at approximately HK$126.6 billion, and the price‑earnings ratio is 9.05.

The company’s financial health, reflected in a healthy ROE and a stable P/E, has historically supported investor confidence. However, the upcoming tariff adjustments and the competitive landscape in coal‑based generation are likely to compress earnings, prompting the downgrade.

Market Reactions

Following the downgrade, short sellers increased their positions by approximately HK$34.66 million (≈ US$4.4 million), indicating a shift in sentiment among market participants. The broader Chinese market has been under pressure, with the Shanghai Composite Index hovering around 4,100 points, reflecting a cautious investor mood amid geopolitical uncertainties and concerns over interest‑rate trajectories.

Outlook

  • Short Term: Investors may reassess their exposure to Huaneng Power International as the company’s earnings trajectory looks less favorable for the next two years.
  • Medium Term: The impact of tariff reforms and coal‑fuel cost dynamics will be pivotal. If tariffs stabilize or the company can secure cost advantages, the outlook could improve.
  • Long Term: As China continues to push for renewable energy expansion, Huaneng’s role in the broader power mix will evolve. The company’s ability to adapt to new generation technologies may mitigate some of the risks highlighted by Citi.

In summary, the Citi downgrade signals a growing concern over Huaneng Power International’s earnings sustainability in the face of tariff pressures and stagnant coal costs. Investors are advised to monitor the company’s response to these regulatory changes and its strategies for diversification into renewables.