HSBC Research lowers the target price of Dongfang Electric to 45 yuan and gives it a "Buy" rating

HSBC Global Research published a report last week indicating that Dongfang Electric (01072.HK) is expected to meet its performance targets for 2025, with net profit increasing by 31% year-on-year to RMB 3.831 billion, benefiting from margin expansion and steady revenue growth across various business segments. The company plans to declare a final dividend of HKD 0.53 per share, a year-on-year increase of 21%, with the payout ratio rising by 1 percentage point to 48%. The bank believes the quality of the performance is good, with limited surprises.

HSBC Research stated that Dongfang Electric's gross margin increased by 1.5 percentage points to 17% last year, mainly driven by improvements in coal, gas, and wind power equipment, while the gross margin for nuclear power equipment remained stable and more resilient compared to peers. Last year, total new orders grew by 16% to RMB 117 billion, with new orders for coal, nuclear, hydropower, and wind power equipment all recording healthy growth of 20% to 30%. The bank believes that new orders for coal power equipment may face downside risks and will need to wait for details on the "14th Five-Year" power plan.

The bank has lowered its profit forecast for Dongfang Electric for 2027 by 3% and introduced a forecast for 2028. Based on a classified sum-of-the-parts valuation method, the target price has been reduced from HKD 48 to HKD 45, maintaining a "Buy" rating; the target price for Dongfang Electric (600875.SH) A shares has been lowered from RMB 41 to RMB 39, maintaining a "Hold" rating