Datang Renewable Earnings: Power Output Within Expectation; Shares Undervalued

We keep our fair value estimate for no-moat Datang Renewable, or DR, at HKD 2.94. Trading at a 2024 price/book ratio of 0.3 times and 2024 price/earnings of around 4 times, we believe DR is undervalued. We expect net income to grow at a CAGR of 10.7% during 2022-27, mainly attributable to rising installed capacity. Nonetheless, our top pick for the renewable energy players is China Longyuan, given the firm’s leadership position and strong execution track record. Subsidy settlement has been slow, and we believe positive development on this front could help to rerate the sector. We lower DR’s Morningstar Uncertainty Rating to High from Very High as we think the firm will benefit from the government's commitment to support the renewable energy industry.