Analysts at Daiwa have released a research report upgrading their investment rating for ENN ENERGY (HKEX: 02688) by one notch to "Buy." The firm has simultaneously lowered its target price for the stock by 18.8% to HK$55 from HK$67.7, based on a discounted cash flow (DCF) valuation model.

The report suggests that a 7% yield provides downside support for the share price, and the removal of negative overhangs related to privatization concerns should help the valuation return to normal levels.

The bank's analysis indicates that the current moment presents a favorable buying opportunity for ENN ENERGY. The company has announced a dividend per share of HK$3 for 2025, implying a core dividend payout ratio of 45.5%, which is fully covered by free cash flow.

Management has also reaffirmed its commitment to shareholder returns. The parent company level has set a minimum dividend payout ratio of 50% for the years 2026-2028, providing a strong guarantee for group dividends.

With a forecasted 2026 price-to-earnings ratio of 6.9%, Daiwa believes the risk-reward profile is highly attractive and recommends using post-trade weakness to accumulate shares.