BOCOM INTL: Maintain a buy rating on DATANG RENEW (01798) with a target price lowered to HK$1.81.

BOCOM INTL released a research report stating that due to last year's lower-than-expected increase in installed capacity and electricity prices, they have lowered their profit forecasts for DATANG RENEW (01798) for the years 2026/27 by 37%/39%. It is expected that without any significant impairment items, the company's profit in 2026 is expected to rebound. The bank maintains the company's valuation at 8 times the 2026 P/E ratio (similar to the 5-year historical average), with a revised target price of HK$1.81. Currently, the stock price corresponds to approximately 7 times the 2026 P/E ratio, reflecting last year's cost and operational pressures. The bank maintains a buy rating. Key points from BOCOM INTL include: - Due to fast growth in costs and impairment effects, the core profit for 2025 was lower than expected. - The company's net profit for 2025 decreased by 37% year-on-year, with core profits decreasing by 29% to RMB 1.44 billion, lower than the bank's expectations by approximately 25%. The decline in profits was mainly due to: 1) the rapid increase in equipment depreciation/amortization costs compared to electricity generation growth; 2) an increase in impairment provisions of about RMB 3 billion year-on-year; 3) an increase in effective tax rates due to the end of tax incentives for the Inner Mongolia project. In addition, the company received approximately RMB 4.5 billion in subsidy repayments, improving free cash flow to a net inflow of RMB 1.9 billion. Regarding dividends, the final dividend was consistent with the interim dividend (RMB 0.03 per share), with a full-year dividend payout ratio of 27%, similar to that of 2024. - Significant power restrictions in 2025 led to a slowdown in installed capacity growth during the period. - In terms of power generation in 2025, the wind and photovoltaic generation increased by 5.32% and 41.57% year-on-year respectively, mainly due to the commissioning of new projects. However, due to factors such as increased power restrictions and resource fluctuations, the average utilization hours for wind power decreased by 93 hours year-on-year to 2,077 hours, and for photovoltaic power decreased by 333 hours year-on-year to 1,139 hours. In terms of newly installed capacity, wind power installed capacity decreased by 129 megawatts year-on-year due to the exclusion of the Shanghai project, while photovoltaic installed capacity increased by 524 megawatts year-on-year, in addition to the company's new energy storage installation of 510 megawatts. - The Ningxia Zhongwei Cloud Base integrated electricity calculation benchmark project is a key project for the company this year. - The company obtained 3.6 gigawatts of new energy construction quotas in 2025 (with wind power accounting for 2/3). At the same time, approvals were obtained for 6 projects with a total capacity of 256,000 kilowatts for the replacement of old wind farms with larger ones. The management currently maintains a target of 3 gigawatts of new wind/solar installations for 2026, while the bank expects an addition of 1.8/1.0 gigawatts of wind/solar installations for the full year, including 1.5 gigawatts of new wind power installations in the Ningxia Zhongwei Cloud Base data center green electricity supply project, which is expected to be completed this year. This project is the first large-scale integrated electricity calculation benchmark project in mainland China, and the bank expects that the electricity generated by this project can be more effectively absorbed locally compared to other projects, which should have a positive impact on the company's profits for the year.