Datang Renewable’s 9M 2022 Generation Volume In Line; Capacity Growth To Drive Earnings

We keep our fair value estimate for Datang Renewable, or DR, at HKD 2.74 per share. Trading at a 2022 price/book ratio of 0.5 times and 2023 price/earnings of around 7 times, we believe DR presents decent upside . However, we think a higher margin of safety is warranted, given DR’s aggressive expansion plan, which could stretch its financial position. Our top pick in the sector is China Longyuan, given the firm’s leadership position and strong execution track record. We believe positive development on subsidy settlement will continue to be a catalyst for the sector, but we think state-owned enterprises will receive priority treatment over private players. Hence, although Xinyi Energy—a private solar farm developer—is undervalued now, the delay in subsidy settlement and the rising interest rate concerns would continue to cap its near-term performance.