Key Takeaways
Bank of Communications International cut its price target for Datang Renewable (01798) to HK$1.81 after the company’s 2025 net profit fell 37 percent year-over-year, missing analyst expectations.
The bank maintained its “Buy” rating, noting the current share price has likely factored in last year’s cost and operational pressures, according to its April 3 report.
The target price reduction was driven by a 37 percent and 39 percent cut to 2026 and 2027 profit forecasts, respectively. Datang’s 2025 core profit of 1.44 billion yuan missed BOCOM’s estimate by about 25 percent due to rising depreciation, a 300 million yuan increase in impairment provisions, and a higher effective tax rate.
The new HK$1.81 target is based on an 8-times 2026 price-to-earnings multiple. The stock currently trades at about 7-times forward earnings, with BOCOM expecting a profit rebound in 2026 assuming no major new impairments.
Operationally, Datang’s power generation increased in 2025, with wind and solar output rising 5.32 percent and 41.57 percent, respectively. However, this was offset by lower utilization, as industry-wide curtailment saw average wind and solar hours fall by 93 and 333 hours, respectively.
For 2026, management is targeting 3 gigawatts of new wind and solar installations. A key project is a 1.5 GW wind farm in Ningxia designed to supply green power to a data center hub, which BOCOM expects will have a higher rate of local power consumption and positively impact earnings this year.
The earnings miss highlights significant operational headwinds from power curtailment across China's grid. Investors will be watching for the successful and timely completion of the Ningxia project to see if the company can hit its 2026 growth targets and restore profitability.
This article is for informational purposes only and does not constitute investment advice.
