Investment Value Comparison of Thermal Power vs. Bank Stocks and Impact of Depreciation-Driven Hidden Assets

Comprehensive Analysis

Asset Transparency Comparison

Banks like ICBC (1398.HK) disclose formal metrics such as NPL ratios (2025H1: 1.33%) and provision coverage (2025H1: 217.71%) [1], but the market widely critiques potential manipulation of these figures through loan classification and provisioning policies, reducing asset transparency [2]. In contrast, thermal power assets (e.g., power plants) are tangible, with valuations less subjective, making them relatively more transparent [2].
Depreciation-Driven Hidden Assets

Peer company Huadian International reports thermal power main equipment has a depreciation period of 18-22 years, while the economic lifespan (actual usable life) is typically 30 years [3]. For Huaneng International, similar industry-standard depreciation policies apply. The user cites Huaneng’s 630 billion yuan book value power units with over 300 billion yuan depreciated, indicating understated book value (hidden assets) due to shorter depreciation periods. The claim of a 40+ year operational lifespan is unsubstantiated by industry data, which shows ~30 years economic lifespan [3].
Dividend Payout Comparison

Huaneng International’s 2025 semi-annual report confirms a dividend policy of distributing at least 50% of annual distributable profits (excluding large loss years) [4]. The 2023 bank sector average dividend payout ratio was 29.28%, with ICBC maintaining a ~30% payout level [5]. This higher dividend commitment is supported by thermal power’s stronger cash flow generation compared to banks.

Key Insights

Asset Tangibility Reduces Valuation Subjectivity

Thermal power’s tangible assets (power plants, equipment) offer lower valuation subjectivity than banks’ opaque loan books, addressing investor concerns about hidden risks in financial institutions [2].
Hidden Assets Imply Revaluation Upside

The mismatch between depreciation periods and economic lifespans creates hidden assets, suggesting potential valuation upside for low P/B thermal power stocks like Huaneng International (current P/B 0.85x [0]) if asset values are revalued.
Dividend Advantage Enhances Income Appeal

Thermal power stocks’ higher dividend commitment (50% vs. banks’ 30%) improves their appeal as income-generating investments, especially with strong cash flow support [4][5].

Risk and Opportunities

Opportunities

Undervaluation Potential
: Hidden assets and low P/B ratios (0.85x for Huaneng [0]) indicate potential undervaluation.
Dividend Yield Attraction
: Higher dividend commitments enhance appeal for income-focused investors.
Regulatory Support
: Thermal power remains a key energy source, with potential regulatory support for stable operations.

Risks

Unverified Claims
: The 40+ year operational lifespan claim lacks industry data support [3].
P/B Ratio Discrepancy
: The user’s claimed 0.6x P/B ratio for Huaneng contrasts with current 0.85x data [0], possibly due to outdated or different calculation methodologies.
Sector-Specific Risks
: Thermal power stocks face coal price volatility, environmental regulatory changes, and operational risks.
Generalization Risk
: The analysis focuses on Huaneng International and may not represent the entire thermal power sector.

Key Information Summary

Thermal power stocks have verified advantages in dividend payouts and asset tangibility, with potential hidden assets from depreciation policies.
Bank stock opacity remains a market concern, despite formal disclosure of NPL and provision metrics.
Investors should verify lifespan claims, monitor P/B ratio consistency, and consider sector-specific risks before making decisions.

Investment Value Comparison of Thermal Power vs. Bank Stocks and Impact of Depreciation-Driven Hidden Assets

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