JPMorgan Downgrades Longyuan Power (0916) to Neutral on Weak Power Prices and Utilization Hours
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
JPMorgan has downgraded Longyuan Power (0916.HK) from Overweight to Neutral, slashing its target price by 19% from HK$8.60 to HK$7.00. The revision follows the company's disappointing 2025 results, where net profit fell 27% year-over-year to RMB 4.6 billion, missing Bloomberg consensus estimates by 25%.
The earnings shortfall was primarily driven by the wind power segment, where operating profit dropped 22% to RMB 9.7 billion. This decline stemmed from a 10% year-over-year decrease in power prices and a 6% drop in utilization hours. Although the solar segment delivered a stellar 121% year-over-year increase in operating profit to RMB 1.15 billion, it was insufficient to offset the broader weakness in wind operations, which still constitute 94% of total renewable installed capacity.
While Longyuan projects that contract volumes and contract-for-difference coverage will reach 70% of total generation in 2026, JPMorgan expects the broader market power price downtrend to persist. Furthermore, the bank views recent improvements in subsidy recovery as unsustainable into 2026.
Consequently, JPMorgan cut its 2026-2027 earnings forecasts by approximately 40%. At the current share price of HK$6.61, the stock trades at roughly 11.2x the 2026 estimated price-to-earnings ratio. The new HK$7.00 target is based on 0.75x price-to-book, sitting 1.1 standard deviations below the historical mean.