Maintain "Buy": Our 2023-2025 EPS forecasts remain unchanged at RMB0.41/ RMB0.51/ RMB0.65, respectively. Our TP remains unchanged at HK$3.10 (based on 7.0x 2023 PE).
　　Solid power generation growth in the first 8 months: In August, DTR's wind generation dropped by 21.26% yoy, likely due to lower wind speeds, a prevailing condition in China's "Three-North" region during the month. But the impact was limited as August is traditionally a low wind season. Solar output in August maintained its growth momentum, up 22.99% yoy. For the first 8 months this year, the growth of DTR's total power generation remained strong at 16.44% yoy, driven by more efficient operations, better wind and solar resources overall, and capacity growth.
　　Business outlook: We believe DTR is now better positioned to deliver capacity expansion as the key growth-constraining factors, i.e. overly high IRR requirements and limited autonomy for project development, have been resolved since 2022 under a new set of corporate strategies initiated by its parent company China Datang Corporation. We believe DTR's 2023 capacity installation target of 1.5-2.0GW is rather conservation and its capacity growth could accelerate from 2023 onwards. Meanwhile, DTR's ongoing operational optimisation, which has led to consistent improvement in asset utilisation over the past few years, is another key driver for earnings growth. The potential to improve earnings profile via wind repowering is also huge. We believe DTR will have around 4.0GW of wind capacity suitable for repowering by the end of 2025. Wind repowering, on average, can more than double the generation capacity and triple the power output of a repowered site.
　　Attractive valuation following recent share plunge: DTR's shares have plunged nearly 20% since 30th August amid weaker investor sentiment for the power utility sector. DTR's shares are currently trading at 4.5x forward PE, about +1.6 SD below its historical average over the past three years (based on Bloomberg consensus forecasts). Given DTR's improving asset quality and its room for growth over the next few years, we believe the current valuation implies limited downside.
　　Downside risks: Weaker-than-expected power demand; delay in project roll-out; unfavourable changes of regulations and policies for IPPs; extreme weather conditions.