China Longyuan Earnings: Negatives Largely Reflected in Share Price; Shares Remain Undervalued

China Longyuan’s first-quarter 2023 results were broadly in line with our expectations, but we cut our fair value estimate to HKD 12.00 from HKD 14.00 to factor in depreciation of the Chinese yuan and higher midcycle accounts receivable days, given the slow subsidy collection. However, we think the risk of lower tariffs and slow subsidy collection are largely reflected in the current share price. Trading at 2023 price/book of around 0.6 times, we believe Longyuan is attractive given the firm’s strong renewable energy capacity growth. We estimate Longyuan’s net profit to grow at a CAGR of 27.7% during 2022-27.