Stock Analysis & Valuation Chongqing Three Gorges Water Conservancy and Electric Power Co., Ltd. (600116.SS)

• Previous Close: $6.85
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	18.61	172
Intrinsic value (DCF)	5.29	-23
Graham-Dodd Method	0.75	-89
Graham Formula	0.14	-98

Strategic Investment Analysis

Company Overview

Chongqing Three Gorges Water Conservancy and Electric Power Co., Ltd. is a prominent renewable energy utility company based in Chongqing, China, with nearly a century of operational history since its founding in 1929. The company specializes in hydropower generation and electricity distribution, operating a substantial portfolio of hydropower stations with a total installed capacity of 750,000 kW. Beyond power generation, the company maintains an extensive electrical infrastructure network including 9 110KV substations and 19 35KV substations with a combined capacity of 1137.05MVA. The company's diversified operations include electrical and mechanical equipment installation, maintenance, and commissioning services, as well as contracting for electrical engineering, urban and road lighting projects, and water conservancy construction. As China continues to prioritize renewable energy development and grid modernization, Chongqing Three Gorges plays a critical role in the nation's clean energy transition, serving both urban and rural electricity needs while contributing to regional economic development through reliable power supply and infrastructure services.

Investment Summary

Chongqing Three Gorges presents a mixed investment profile with both attractive renewable energy exposure and significant financial challenges. The company operates in China's strategically important renewable utilities sector, benefiting from government support for clean energy and grid infrastructure. However, the investment case is tempered by substantial financial leverage with total debt of CNY 8.77 billion against market capitalization of CNY 10.4 billion, indicating high debt levels. The company maintains modest profitability with net income of CNY 309.7 million on revenue of CNY 10.32 billion, resulting in thin margins. Positive operating cash flow of CNY 898 million is overshadowed by heavy capital expenditures of CNY -1.8 billion, suggesting ongoing infrastructure investments. The low beta of 0.483 indicates defensive characteristics relative to the broader market, while the dividend yield provides some income appeal. Investors should weigh the company's strategic position in China's renewable energy transition against its leveraged balance sheet and capital-intensive business model.

Competitive Analysis

Chongqing Three Gorges occupies a specialized regional position within China's renewable utilities landscape, with its competitive advantage stemming from its established hydropower assets and integrated electrical infrastructure in the Chongqing region. The company's nearly century-long operational history provides deep institutional knowledge and longstanding relationships with local authorities and customers. Its vertically integrated model—combining power generation, distribution, and engineering services—creates operational synergies and multiple revenue streams. However, the company faces intense competition from larger state-owned utilities with greater financial resources and scale advantages. National power giants like China Yangtze Power possess significantly larger hydropower portfolios and financial capacity for expansion. The company's regional focus limits its growth potential compared to national competitors but provides defensive characteristics through established market presence. The capital-intensive nature of the utilities sector creates barriers to entry but also requires continuous investment, challenging smaller players like Chongqing Three Gorges. The company's competitive positioning is further complicated by China's evolving electricity market reforms and increasing competition from other renewable sources like solar and wind, which may pressure traditional hydropower operators. Its ability to maintain regional dominance will depend on operational efficiency, regulatory relationships, and strategic adaptation to China's evolving energy landscape.

Major Competitors

• China Yangtze Power Co., Ltd. (600900.SS): As the world's largest hydropower company, China Yangtze Power operates the massive Three Gorges Dam and other major hydropower facilities with significantly greater scale and financial resources than Chongqing Three Gorges. The company benefits from massive generation capacity, strong government backing, and superior financial metrics. However, its enormous size may limit agility in adapting to market changes, and it faces regulatory scrutiny due to its dominant market position. Compared to Chongqing Three Gorges, Yangtze Power has national rather than regional focus, reducing direct competition but representing a vastly larger benchmark in the sector.
• China National Nuclear Power Co., Ltd. (601985.SS): As a major nuclear power operator, China National Nuclear Power represents competition in the broader clean energy space. The company benefits from government support for nuclear energy development, high capacity factors, and stable baseload power generation. However, nuclear power faces public acceptance challenges, high safety requirements, and long development timelines. Unlike Chongqing Three Gorges' regional hydropower focus, CNNP operates nationally with different technology and regulatory considerations, representing alternative clean energy investment rather than direct competition.
• China General Nuclear Power Corporation (003816.HK): As one of China's two major nuclear power companies, CGN competes in the clean energy sector with large-scale nuclear operations and growing renewable investments. The company has strong technical capabilities and government relationships but faces international scrutiny on technology exports and nuclear safety concerns. Its nuclear focus differentiates it from Chongqing Three Gorges' hydropower specialization, though both operate in the regulated utility space with similar challenges around capital intensity and regulatory dependence.
• Huaneng Power International, Inc. (600011.SS): As one of China's largest power generators, Huaneng operates diverse generation assets including thermal, renewable, and increasingly clean energy sources. The company benefits from massive scale, diversified fuel mix, and nationwide presence. However, it faces challenges from coal phase-out policies and environmental regulations. Compared to Chongqing Three Gorges' regional hydropower focus, Huaneng has broader geographical coverage and generation technology diversity, representing both competition and a different business model approach to power generation.
• Huadian Power International Corporation Limited (600027.SS): Another major national power producer, Huadian operates thermal, hydro, wind, and solar assets across China. The company has been actively transitioning toward cleaner energy sources while maintaining its thermal fleet. Its strengths include geographical diversification and evolving clean energy portfolio, but it faces challenges from coal asset stranded risks and competitive power markets. Huadian's national scale and diversified generation mix contrast with Chongqing Three Gorges' regional hydropower specialization, representing different strategic approaches to the power market.