Bank of Communications International has issued a research report stating that, considering last year's newly installed capacity and grid feed-in tariffs both fell below expectations, it has lowered its profit forecasts for DATANG RENEW (01798) for 2026/2027 by 37% and 39%, respectively. The bank anticipates a potential rebound in the company's 2026 earnings, barring any significant impairment charges. It maintains the company's valuation at 8 times the 2026 price-to-earnings ratio, consistent with its 5-year historical average. The target price has been adjusted downward to HK$1.81. The current share price implies approximately 7 times the 2026 P/E ratio, which is believed to already reflect the cost and operational pressures experienced last year. A Buy rating is reaffirmed.

The core profit for 2025 fell short of expectations, primarily due to rapid growth in costs and the impact of impairment charges. The company's net profit for 2025 decreased by 37% year-on-year, while core earnings dropped 29% to 1.44 billion yuan. This underperformance was mainly attributed to: 1) installed capacity depreciation/amortization expenses rising faster than electricity generation growth; 2) a year-on-year increase of approximately 300 million yuan in impairment provision accruals; and 3) an increase in the effective tax rate following the expiration of tax incentives for the company's Inner Mongolia projects.

Additionally, during the period, the company received subsidy repayments of about 4.5 billion yuan, leading to an improvement in free cash flow, which turned to a net inflow of 1.9 billion yuan. Regarding dividends, the final dividend remained consistent with the interim dividend at 0.03 yuan per share, resulting in a full-year dividend payout ratio of 27%, similar to the 2024 level.

Grid curtailment remained significant in 2025, and the pace of capacity growth slowed somewhat. In terms of power generation for 2025, wind and photovoltaic controlled electricity output increased by 5.32% and 41.57% year-on-year, respectively, largely due to new project commissioning. However, average utilization hours declined; wind power averaged 2,077 hours, a decrease of 93 hours year-on-year, and photovoltaic averaged 1,139 hours, down 333 hours year-on-year, affected by increased industry-wide curtailment and resource volatility.

Regarding new installations, wind power capacity saw a net decrease of 129 MW year-on-year by year-end, partly because the Shanghai project was no longer consolidated. Photovoltaic capacity increased by 524 MW year-on-year. The company also added 510 MW of energy storage capacity. The company secured 3.6 GW of new energy construction indicators for the full year 2025, with wind power accounting for two-thirds. Additionally, six projects totaling 256 MW under the old wind farm repowering initiative received approval.

Management currently maintains the target of adding 3 GW of new wind and solar capacity in 2026. The bank's current expectation is for the company to add 1.8 GW of wind and 1.0 GW of solar capacity for the full year. This includes 1.5 GW of new wind capacity associated with the green power supply project for the data center at the Ningxia Zhongwei Cloud Base, expected to be completed within the year. This project is considered a benchmark as the first large-scale integrated computing-power project in mainland China. The bank anticipates that a higher proportion of the electricity generated by this project will be consumed locally compared to the company's other projects, which should positively impact this year's earnings.