Analysis of Investment Value Differentiation in Sub-sectors of the Power Industry

This analysis is based on investment research notes in the power industry [0] and relevant reports from Bloomberg. As low-risk, low-beta assets, hydropower and nuclear power have stable cash flow characteristics, so their valuation logic is mainly based on the denominator-side discount rate [0][1]. Yangtze Power (600900.SS), as a leading hydropower company, has seen a stable stock price increase of 45.63% in the past 5 years, with a net profit margin of 39.46%, the highest in the industry, and a current P/E ratio of 20.70x; China Nuclear Power (601985.SS) has increased by 78% in the past 5 years, with a P/E ratio of 21.03x, both benefiting from the low level of China’s 10-year government bond yield of 1.82% in 2025 [0][1].

In the wind and solar power sector, after grid parity, due to overcapacity, it faces downward pressure on electricity prices. For example, overcapacity in China’s photovoltaic industry in 2025 led to a drop in electricity prices [2], while the collapse of coal prices further depressed the electricity prices of industrial hubs [3]. Overcapacity in photovoltaic industry in provinces like Shandong has intensified price fluctuations in the spot market [4]. LONGi Green Energy (601012.SS), as a leading solar energy company, has a current P/E ratio of -24.84x and a net profit margin of -7.36%; Goldwind Technology (002202.SZ), as a leading wind power company, has a net profit margin of only 3.84% [0], and its profitability is significantly under pressure.

The core of the differentiation in investment value between hydropower, nuclear power, and wind/solar power lies in the stability of cash flow and the supply-demand pattern of the industry. The natural resource attributes and mature business models of hydropower and nuclear power ensure stable cash flow, making them have allocation value in a low-interest rate environment [0][1]; although wind and solar power have growth potential, overcapacity after grid parity and challenges from policy withdrawal lead to increased profit uncertainty, and the current valuation logic has shifted from growth-driven to supply-demand balance and cost control.

• Risks
  : Continuous overcapacity in wind and solar power leads to the risk of electricity price decline [2][3], and spot market fluctuations intensify profit uncertainty [4]; hydropower and nuclear power depend on the interest rate environment, and future interest rate hikes may compress valuation space [1].
• Opportunities
  : The stable income attribute of hydropower and nuclear power in the low-interest rate environment has allocation value [1]; technological iteration and structural policy support in wind and solar power may bring local opportunities.

The investment value of sub-sectors in the power industry is clearly differentiated. Hydropower (such as Yangtze Power) and nuclear power (such as China Nuclear Power) are low-risk, stable-income assets with reasonable current valuations; wind and solar power face overcapacity and profit pressure, so changes in supply-demand patterns and technological breakthroughs require attention.
The five major hydropower companies, the two nuclear power giants, and Hong Kong-listed green power targets need further detailed analysis and verification.