UBS Asia Utilities -„ Remove Lanco from Most Preferred

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UBS Investment Research
Asia Utilities
Alpha Preferences
 
„ Remove Lanco from Most Preferred
We included Lanco as most preferred as we expected strong merchant power tariff
driven by power shortage and Lanco to benefit along with it as it executed on its
power plant build-out plans. However, slowing economic growth, higher financing
cost and ongoing uncertainty over coal availability have become headwinds to the
sector and have reduced our conviction level on the call. Therefore, we are
removing it from the Most Preferred list, but the stock remains Buy rated and our
SOTP-derived price target is unchanged at Rs70.0.
„ Remove Adani Power from Least Preferred
We remove Adani Power from Least Preferred as it has declined 12% YTD. We
still maintain Sell rating on the stock. Although we like the company for its strong
execution, we think the current valuation does not fully factor the risk of lower
merchant tariff and no fuel escalation in PPAs.
„ Our Most and Least preferred
Our current Most preferred list contains China Gas, Datang Corp Renewable
Power, and KEPCO. China Resources Gas and China Longyuan remain on our
Least preferred.