Datang Renewable Earnings: Results Hit by Lower Tariff, Higher Operating Costs, and Impairments
We cut our fair value estimate for Datang Renewable, or DR, to HKD 2.00 per share from HKD 2.94 to account for worse-than-expected 2023 net profit, which fell 24% year on year to CNY 2.2 billion. The fall was mainly due to impairment losses, higher operating costs, and lower tariff. As a result, we cut our 2024-26 earnings forecasts by 17%-23%. With shares trading at a 2024 price/book ratio of 0.3 times, we think DR is undervalued. However, we think investors will stay on the sidelines until the firm’s tariff stabilizes and there are signs of quicker subsidy settlement by the government.