UOB Kay Hian
April 30, 2025
China Longyuan Power: Navigating Headwinds Amid Policy Shifts and Rising Curtailment Rates
Overview: Cautious Outlook for China’s Leading Wind Farm Operator
China Longyuan Power Group (916 HK), China’s largest listed wind farm operator, reported its first quarter 2025 results, reflecting a challenging environment characterized by rising curtailment rates, policy uncertainty, and subdued wind resources. Despite maintaining its position as a renewable energy giant, the company faces several operational and regulatory headwinds, prompting a cautious stance for investors. UOB Kay Hian maintains a HOLD rating with a revised target price of HK\$6.60.
Stock Snapshot and Shareholder Structure
- Share Price: HK\$6.10
- Target Price: HK\$6.60 (Down from HK\$6.70)
- Upside: 8.2%
- 52-Week Range: HK\$8.30 – HK\$4.37
- Market Cap: HK\$110.49 billion (US\$14.24 billion)
- Major Shareholder: China Guodian Corporation (63.7%)
- GICS Sector: Utilities
- Bloomberg Ticker: 916 HK
- Shares Issued: 3,317.9 million
- FY25 NAV/Share: RMB 9.22
- FY25 Net Debt/Share: RMB 17.88
1Q25 Financial Results: Profitability Under Pressure
China Longyuan Power reported 1Q25 earnings of RMB 1,977.1 million, marking a 21.8% year-on-year decline. While wind power generation increased to 17,776 GWh (up 4.4%), this growth lagged behind the expansion in operational capacity, highlighting utilization challenges.
| Year to 31 Dec (RMBm) |
1Q24 Restated |
1Q25 |
YoY Change (%) |
| Revenue |
8,066.2 |
8,140.1 |
0.9 |
| Wind Power Revenue |
7,510.2 |
7,368.2 |
(1.9) |
| Photovoltaic Power Revenue |
499.7 |
715.0 |
43.1 |
| Other Net Income |
272.7 |
304.9 |
11.8 |
| Operating Expenses |
(4,214.9) |
(4,810.4) |
14.1 |
| Operating Profit |
4,124.0 |
3,634.6 |
(11.9) |
| Net Finance Expenses |
(878.5) |
(825.3) |
(6.1) |
| Net Profit |
2,528.9 |
1,977.1 |
(21.8) |
| EBIT Margin (%) |
51.1 |
44.7 |
(6.5) |
| Net Profit Margin (%) |
31.4 |
24.3 |
(7.1) |
Key Financial Metrics and Forward Estimates
| Year to 31 Dec (RMBm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
37,638 |
31,370 |
33,641 |
36,293 |
40,231 |
| EBITDA |
22,603 |
25,189 |
26,425 |
28,370 |
30,387 |
| Operating Profit |
11,883 |
13,719 |
14,176 |
15,343 |
16,572 |
| Net Profit (Rep./Act.) |
6,276 |
6,801 |
6,192 |
6,834 |
7,493 |
| EPS (sen) |
74.9 |
81.3 |
73.9 |
81.5 |
89.4 |
| PE (x) |
7.6 |
7.0 |
7.7 |
7.0 |
6.4 |
| P/B (x) |
0.7 |
0.7 |
0.6 |
0.6 |
0.5 |
| EV/EBITDA (x) |
11.9 |
10.6 |
10.2 |
9.5 |
8.8 |
| Dividend Yield (%) |
3.9 |
4.0 |
3.9 |
4.3 |
4.7 |
| Net Margin (%) |
16.7 |
21.7 |
18.4 |
18.8 |
18.6 |
| Net Debt/(Cash) to Equity (%) |
169.2 |
196.1 |
193.9 |
184.5 |
174.8 |
Operational Highlights: Capacity and Generation Trends
- Minimal New Installations in 1Q25: Consolidated capacity was largely flat quarter-on-quarter at 41,149.45 MW, a 13.8% year-on-year increase. New installations included only 34.75 MW of wind and 1.5 MW of photovoltaic capacity, reflecting seasonal trends and project scheduling constraints.
- Wind Power Capacity: 30,443.52 MW (+9.6% yoy)
- Photovoltaic Capacity: 10,699.83 MW (+65.5% yoy)
Installed Capacity and Generation Breakdown
| Segment (MW) |
1Q24 |
1Q25 |
YoY Change (%) |
| Wind Power |
27,781 |
30,444 |
9.6 |
| Coal Power |
1,875 |
– |
– |
| Photovoltaic |
6,464 |
10,700 |
65.5 |
| Other Renewable |
36 |
6.1 |
(83.1) |
| Total |
36,156 |
41,149 |
13.8 |
| Segment (GWh) |
1Q24 |
1Q25 |
YoY Change (%) |
| Wind Power |
17,031 |
17,776 |
4.4 |
| Coal Power |
2,581 |
– |
– |
| Photovoltaic |
1,612 |
2,509 |
55.7 |
| Other Renewable |
1.4 |
1.5 |
6.8 |
| Total |
21,225 |
20,286 |
(4.4) |
Policy Shifts and Curtailment: Key Risks Ahead
- Rising Curtailment Rates: Wind power curtailment increased to 4.4%, up from 3.86% in 2024, contributing to a reduction in average utilization hours to 585 (-55 hours year-on-year).
- Policy Uncertainty: The impending transition to a fully market-based pricing mechanism for renewables (effective June 2025, Document No. 136) is leading the company to moderate its 2025 installation target to 5,000 MW, compared to 7,480.7 MW in 2024. This shift is expected to increase price volatility and intensify competition.
- Declining On-Grid Tariffs: On-grid wind power tariffs declined to RMB 0.43/kWh (down RMB 0.007/kWh yoy) due to higher market-based trading. The average wind power MPS tariff fell by RMB 0.04/kWh (9.4% yoy). Photovoltaic on-grid tariffs saw a slight year-on-year uptick to RMB 0.27/kWh.
- Margin Pressure: Overall on-grid tariffs are expected to remain under pressure post-policy shift, with continued margin erosion likely.
Financial Position and Cash Flow Analysis
- Net Debt to Equity: Expected to remain elevated but gradually decrease from 196.1% in 2024 to 174.8% by 2027.
- Dividend Yield: Stable and attractive, ranging from 3.9% to 4.7% over the forecast period.
- Cash Flow: Capex remains high, with substantial investments planned, but operating cash flow is robust, supporting dividends and debt service.
Valuation and Recommendation
- Rating: HOLD (Maintained)
- DCF-based Target Price: HK\$6.60 (WACC: 4.6%; Terminal Growth: 3%)
- Rationale: While China Longyuan Power maintains a strong market position in wind and solar, the combination of rising curtailment rates, declining tariffs, and growing subsidy arrears is deteriorating the operating environment. Policy changes requiring new projects to participate in market-based trading will bring greater price volatility and competition. The outlook remains cautious given these risks.
Potential Catalysts and Risks
- Upside: Stronger-than-expected power generation could drive share price appreciation.
- Key Risks: Higher curtailment rates, lower tariffs, policy-driven installation delays, and intensifying competition in the renewables sector.
Conclusion
China Longyuan Power continues to be a bellwether for China’s renewable energy transition. However, investors should remain vigilant as the sector navigates a period of increasing operational and policy challenges. The company’s response to rising curtailment, policy reforms, and evolving market dynamics will be critical in determining its financial performance and share price trajectory in the coming quarters.
