Utilities Monthly: Rising Costs and Diminishing Yield Appeal – Deutsche Bank

Key Takeaways

• 1.China Resources Power (CR Power) is downgraded from Buy to Hold with a target price cut from HK$23.50 to HK$20.00 due to narrowing thermal dark spreads, soft demand, and fair dividend yield (~5%).
• 2.Thermal power dark spreads collapsed from Rmb158/MWh in 2025 to ~Rmb50/MWh in September 2026, driven by a 38% YoY surge in Qinhuangdao spot coal prices and sluggish market tariffs.
• 3.Gas utilities are preferred over thermal power operators, with China Gas Holdings as the top subsector pick offering an attractive 6.9% FY26E dividend yield and sound pass-through mechanisms limiting margin compression.

Table of Contents

• Rising fuel costs weigh more on thermal power
• Demand remains soft
• Downgrade CR Power to Hold; Prefer gas utilities
• Rising cost pressure for thermal power
• Power demand growth remained weak in August
• Power supply - softer thermal and hydro generation
• Power utilization
• Power capacities additions
• Valuation comparison - power operators
• Renewable operators – one-year-forward P/B history
• Renewable operators – dividend yield history
• Mainland gas demand remains weak
• Rising gas cost is a risk into winter
• Valuation comparison - gas utilities
• Gas utilities – one-year-forward P/E history
• Gas utilities – Dividend yield history
• China Resources Power - Downgrade to Hold as risk-reward becomes less attractive
• Thermal-power margins face renewed pressure
• Valuation now broadly fair
• Running the numbers

Report data

China coal-fired power dark spread tracker (DBe) — as of September 28, 2026.