Citi: Upgrades China Longyuan Power Group Corporation (00916) rating to "Buy"; cuts target price to HK$6.8

Citi issued a research report stating that it has upgraded the rating of China Longyuan Power Group Corporation (00916) from "Neutral" to "Buy", while cutting the target price from HK$7 to HK$6.8. The bank expects the company's earnings growth to recover in 2027, driven mainly by a year-on-year rebound from a low base in wind farm utilization rates after a cumulative 18% decline over the past three years, as well as more sustainable electricity tariffs supported by higher market-based pricing. The bank noted that China Longyuan Power Group Corporation's average wind power tariff in the first nine months of 2026 fell 3.4% year-on-year to RMB0.46 per kWh, mainly due to intensifying competition, a rising share of sales from subsidy-free projects, and an increased proportion of projects in North China with tariffs below the company's average. Citi expects that at the annual contract renewal in January 2027, the company's actual realized electricity tariff will rise 5% to 10% year-on-year, mainly because higher coal prices are pushing up bid tariffs for coal-fired power units, which is expected to offset the aforementioned tariff pressure. The bank lowered its net profit forecasts for China Longyuan Power Group Corporation for 2026 to 2028 by 30%, 13%, and 8%, respectively, mainly reflecting lower wind power utilization rates. Within the CHINA POWER sector, Citi is bullish on non-fossil-fuel operators, expecting them to benefit in 2027 from rising market-based electricity prices and relatively stable cost structures, driving margin expansion. The bank also believes that a landslide victory by the Democrats in the U.S. midterm elections could support market sentiment toward the renewable energy sector.