Analysis of Top 4 China Power Producers (Part 1)

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

The analysis is perform based on 5 years revenue and net profit data of 4 China Power Producers such as Huaneng Power International, Inc. (hereafter called "Huaneng"), China Resources Power Holdings Co. Ltd. (hereafter called "CR Power"), China Power International Dev. Ltd. (hereafter called "China Power") and Datang Inter. Power Generational Co Ltd (hereafter called "Datang").

Revenue

In 2006, it is very clear that Huaneng is the biggest power producer in the country, 52.69% of total revenue out of four companies concentrated to this single company. 5 years later, it's market coverage declined to 45.75% as it's Compound Annual Growth Rate (CAGR) only achieved 23.88%, lowest among the four companies. CR Power achieved highest and impressive CAGR of revenue 49.44%, it's market coverage improves from 11.58% in 2006 to 21.31% in 2010, close to double in 2006 to 2010 period.

Net Profit

In 2010, Huaneng performance was far from satisfaction (if not crying) as it only achieve plus 3,323 millions given the revenue of 104,318 millions compare to year 2007 with less than half of the revenue of 2010, 49,767 millions which gain close to double the net profit of 2010, 6,481 millions. It is worth detail investigation what happened to Huaneng in 2010. In 2006 to 2010, Huaneng achieve year-on-year negative growth in net profit except 2009. It is obvious that 2008 was a difficult year for the energy industry as all four companies had negative growth in net profit where CR Power and Datang remain profitable, Huaneng and China Power experienced massive loss.

Net Profit Margin (NPM)

By looking into the tabular data above, it is no doubt that CR Power poses certain competitive advantages over it's peers. From 2006 to 2010, it's enjoy very wide net profit margin compare to others, approximately double it's competitors averages.

What's Next...
I will look into following items:

1. Why Huaneng's net profit of 2010 minus approximately 50% compared with 2006?
2. Why energy industry experienced minimal profit or massive loss in 2008?
3. What is the competitive advantages of CR Power, is it durable?

I'd look to hear your comments as usual.

Edited on 22-Jun-2011: Correction of Huaneng's Net Profits, update related description, update Net Profit Margin (NPM) table.