Chapter 9

Equity Stakes

Outside its four operating businesses, TBEA carries a ¥5.2bn book of equity stakes — mostly power-sector holdings and private funds. In FY2025 that book produced ¥1.52bn of pre-tax fair-value gains, almost all from marking a single newly-listed holding, Huadian New Energy, to market after its July-2025 IPO [1] [3]. The gains are real and liquid, but non-cash, non-operating, and now a recurring source of reported-earnings volatility.

What the portfolio holds

The stakes sit in two accounting buckets. The larger — ¥4.98bn of "other non-current financial assets," up 41.1% from ¥3.49bn a year earlier — is measured at fair value with changes running through profit [1]. A second, much smaller bucket of ¥0.23bn is designated fair-value-through-OCI, so its marks bypass the income statement entirely [4]. The through-profit bucket is what moves reported earnings.

Source: FY2025 Annual Report, Note VII.19 Other non-current financial assets [1].

Two of the holdings are exchange-listed and therefore marked at quoted prices: Huadian New Energy (600930.SH) at ¥2.50bn and CSG Energy (003035.SZ) at ¥0.52bn, together ¥3.02bn [1] [2]. The remaining ¥1.96bn is unlisted — a ¥0.70bn Southern Power Grid dual-carbon private-equity fund, ¥0.43bn in Shougang's electromagnetic-materials arm, ¥0.32bn in China Huadian's finance holding, ¥0.25bn in Shanghai Nuclear Engineering, and a tail of smaller strategic and venture positions [1]. These are held at model or transaction value, so they carry the fair-value risk of any unlisted mark. The common thread is adjacency to TBEA's own grid, power, and materials businesses rather than a financial-trading book.

One listing did most of the work

The ¥1.52bn of fair-value and disposal gains booked in FY2025 is not a diversified return on a ¥5bn book. Nearly all of it came from one position. TBEA's technology-investment subsidiary held pre-IPO shares of Huadian New Energy at a cost of ¥1.00bn; when Huadian listed on the Shanghai main board on 11 July 2025, that stake was re-marked to the closing price and rose to ¥2.50bn — a single-year gain of ¥1.49bn [2] [5]. The CSG Energy stake added ¥0.05bn [2]. The income statement's fair-value-change line swung from a ¥0.19bn loss in FY2024 to a ¥1.58bn gain in FY2025 on the strength of that one revaluation [6].

Because it is a revaluation of a pre-existing holding rather than a sale, the gain is entirely non-cash. TBEA sold none of the position — a 12-month lock-up runs to July 2026 — so no cash entered the business, and the group's own cash-conversion arithmetic (Cash Conversion) is unaffected by it [5]. Against the gain, TBEA also booked a deferred-tax liability that rose to ¥0.43bn, reflecting the tax that would fall due if the mark were ever realised [8].

A recurring source of earnings noise

Classified as non-recurring, this line has swung widely across years: a ¥0.05bn gain in FY2023, a ¥0.14bn loss in FY2024, then the ¥1.52bn gain in FY2025 [3]. On a group that earned ¥5.95bn attributable in FY2025, a line that can move by well over a billion yuan in either direction is a meaningful distortion to any single year's reported result.

Source: FY2025 Annual Report, non-recurring profit-and-loss items, FY2023–FY2025 [3].

Net of tax and minorities, non-recurring items totalled ¥1.40bn in FY2025 — about 24% of attributable profit — and this fair-value line was the bulk of it [3]. That is the same ¥1.40bn adjustment that separates TBEA's ~19x reported multiple from the ~25x recurring multiple set out in the Sum-of-the-Parts. The point this chapter adds is where it comes from: not a diversified investment yield, but the mark on one newly-public stake. Now that Huadian trades daily, that ¥2.50bn position will re-price with its share price every reporting date — the gain that lifted FY2025 can as easily reverse into future periods.

Separately from these marks, TBEA's investment-income line carries ¥0.73bn of gains on disposing long-term equity investments and ¥0.07bn of equity-method income — a recurring, if lumpy, contribution that sits alongside the portfolio but is distinct from the fair-value revaluations [7].

How to read it

The evidence supports a measured, two-sided read. The value is real: the two listed stakes cost ¥1.22bn and are worth ¥3.02bn, a ¥1.80bn cumulative unrealised gain in liquid, quoted securities, with further unrecognised value plausible in the unlisted holdings [1] [2]. At ¥5.2bn the portfolio is roughly 7% of attributable equity and 4.6% of market value — a modest cushion, not a needle-mover on the valuation. The strongest fact against reading it as hidden value is that it is a poor guide to operating performance: a book that swings the reported result by more than a billion yuan on one listing makes headline earnings and the ROE built on them noisier than the operating businesses deserve, and none of the FY2025 gain is cash.

Source: FY2025 Annual Report, Notes VII.18–19 and non-recurring items; values in ¥bn [1] [3].

What would change the read is monetisation. The Huadian lock-up expires in July 2026; a post-lock-up sale would convert paper value into cash and validate the mark, while a decline in Huadian's share price before then would reverse part of the gain straight through profit [5]. Either way, the operating engines described elsewhere in this report — grid, coal-and-power, and polysilicon — remain the substance of the case; the equity stakes are a real but secondary asset that a reader should strip out of any single year's earnings before judging the businesses.