Comparative Analysis of Investment Value Between Thermal Power Stocks and Bank Stocks: Evaluation of Investment Potential of Enterprises Like Huaneng International

This analysis is based on the decision-making context of investors shifting to thermal power stocks after underperforming with heavy holdings in bank stocks in 2022. By comparing core financial and operational characteristics of Huaneng International (thermal power) and Industrial and Commercial Bank of China (bank):

1. Price-to-Book Ratio (P/B) and Net Asset Valuation
   : Huaneng International has a P/B ratio of 0.85x, while ICBC has 0.72x—both are in the undervaluation range, but ICBC is more undervalued. Huaneng International’s high depreciation/capital expenditure ratio [0] supports the view that its net assets may be undervalued due to conservative depreciation policies, but there is a lack of industry average depreciation rate data to verify the ‘excessive’ nature of its depreciation.

2. Profitability and Dividends
   : Huaneng International’s ROE (10.25%) outperforms ICBC’s (9.13%), but ICBC’s dividend yield (5.46%) is higher than Huaneng International’s (4.75%) [0]. The original conclusion that ‘thermal power stocks have better dividend yields than bank stocks’ is not supported by data.

3. Operational Characteristics Comparison
   :
   • Going Concern: As basic energy infrastructure, thermal power has stable demand; although banks are the core of the economy, they face regulatory and economic cycle risks. Both have going concern foundations, but thermal power’s defensive characteristics are more prominent.
   • Inflation Benefits: Thermal power can pass on fuel costs with regulatory approval, while banks may face higher interest expenses due to rate hikes. Thermal power has a more obvious advantage in cost transmission under inflationary environments.
   • Asset Quality: Thermal power assets are physical power generation facilities with clear tangible value; bank assets are mainly loan portfolios with credit risk. Thermal power has more stable asset quality [0].

1. Valuation Logic Differences
   : The low P/B ratio of thermal power stocks is affected by industry cycles (e.g., coal price fluctuations) and policies, while the low valuation of bank stocks reflects more concerns about economic growth expectations and asset quality. The undervaluation of Huaneng International’s net assets may be a local phenomenon at the financial policy level rather than a systemic valuation deviation.

2. Return-Risk Characteristics
   : The return potential (ROE advantage) of thermal power stocks and the dividend stability (dividend yield advantage) of bank stocks form differentiated investment logics. Investors need to choose based on their own risk preferences and investment objectives.

3. Data Limitations
   : Due to the lack of comparative data between Huaneng International and industry average depreciation rates, the conclusion of ‘serious undervaluation of net assets’ should be treated with caution, and further verification is needed by combining future depreciation policy adjustments and industry cycle changes.

• Opportunities
  : Thermal power stocks’ cost transmission capacity under inflationary environments, the stability of tangible assets, and the potential valuation repair of enterprises like Huaneng International (if depreciation policies are adjusted) provide investors with differentiated investment targets.
• Risks
  : The thermal power industry still faces risks such as coal price fluctuations and stricter environmental policies; although bank stocks have high dividend yields, credit risk exposure during economic downturns deserves attention. The conclusion of Huaneng International’s net asset undervaluation lacks sufficient data support and may have expected deviation risks.

Overall, thermal power stocks and bank stocks have different investment value characteristics: Thermal power stocks perform well in operational stability, inflation benefits, and asset quality; Huaneng International’s conservative depreciation policy may bring valuation repair space; bank stocks have more advantages in dividend yield. Investors need to make decisions based on their own investment objectives, risk preferences, and judgments on industry cycles and policies. The report does not provide specific buy/sell/hold recommendations and only presents objective analysis based on existing data.