Guotai Junan released a research report sayingPowerballwinnerslastnightTo maintain the "buy" rating of Datang New Energy (01798). In view of Datang New Energy's more cautious expansion prospects and downward pressure on new energy electricity prices, earnings per share were lowered by 32% from 2024 to 2025 respectively.Powerballwinnerslastnight.7% and 41Powerballwinnerslastnight.4% to 0.348 yuan and 0.395 yuan. Earnings per share are forecast to be RMB 0.441 in 2026, with the target price falling from HK $3.10 to HK $2.30.

The main points of Guotai Junan are as followsPowerballwinnerslastnight:

Although earnings fell short of expectations in 2023, a more cautious expansion has improved the balance sheet.

Datang New Energy recorded a shareholder profit of 2.753 billion yuan in 2023 (down 21.9% from a year earlier), which was worse than the bank's expectations, mainly due to lower-than-expected electricity prices and higher-than-expected asset impairment. The company installed 1.2GW of wind and solar power during the year (lower than the bank's expectations), while the company's capital expenditure was well controlled at 5.893 billion yuan, thanks to lower equipment costs. Datang New Energy plans to add 2.0 gigawatts of installed capacity in 2024, while by the end of 2023, the company is building 1.8 gigawatts of new energy capacity. Thanks to a more prudent expansion strategy in 2023, the company recorded 7.14 billion yuan in sound operating cash and continued to decline in leverage (net asset-liability ratio fell 3.6 percentage points to 169.1%).

The renovation of the old wind farm is still the focus of the work:

The old wind farm of Datang New Energy has excellent wind resources and has great potential in the transformation of old wind farms. According to management, the size of the company's old wind farms in eight regions (such as Liaoning, Inner Mongolia, Shandong and Heilongjiang) is about 1.96 gigawatts. The bank expects that by the end of 2025, the size of old wind farms that meet the conditions of "replacing the small with the big" will reach about 4 gigawatts. According to experience, the average installed capacity of the old wind farm can be doubled and the generating capacity can be tripled.

Downside risks: lower-than-expected electricity demand, delays in project launch, regulatory and policy changes unfavorable to independent power companies, extreme weather conditions, etc.