UBS Dongfang Electric-A (600875): Reiterate Buy – Top Pick in China Power and Energy
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UBS reiterates a Buy rating on Dongfang Electric-A (600875.SS), designating it a top pick in the China power and energy sector with a target price of RMB 49.20. UBS believes consensus estimates for 2026–2027 EPS are far too low, with the firm's own projections standing 18–28% higher. In an optimistic scenario factoring in US gas turbine exports, the valuation could reach RMB 61.30 per share, implying roughly 64% upside potential.
The bullish thesis rests on two contrarian views. First, export demand is breaking through from a near-zero baseline. Every 1 GW of gas turbine exports could boost earnings by 16–20%. The company is actively expanding its overseas footprint, securing turbine blade advantages via upstream supplier Yingliu, and reporting robust international inquiries. Second, domestic power demand is strengthening. UBS forecasts medium-term power demand growth of 8–9%, double the consensus estimate, driven by AI expansion, manufacturing electrification, and the need to replace approximately 420 GW of aging coal capacity over the next five to eight years.
Despite a 50% year-to-date rally, Dongfang Electric trades at 21x forward earnings, a substantial discount to international peers at 40–50x. UBS views this as a compelling revaluation opportunity, backed by accelerating export potential and domestic demand. Yingliu (603308.SS) is also rated Buy.