J.P. Morgan: Longyuan’s third-quarter profit falls 56%: wind power prices decline, costs rise and subsidy collection accelerates

Why was profit weaker than JPMorgan expected?

Longyuan’s net profit attributable to shareholders in the third quarter of 2026 was 480 million yuan, down 56% year on year and markedly weaker than JPMorgan’s previous forecast of a decline of about 25%.
The on-grid tariff for wind power fell 5% year on year, a wider decline than the 4.2% recorded in the first half. Third-quarter wind power sales revenue fell 5.4% year on year to 5.03 billion yuan. Over the same period, total revenue edged up 0.5%, driven by growth in other businesses, but operating profit fell 35.4%.
Under Chinese accounting standards, third-quarter cost of sales rose 14% year on year to 4.95 billion yuan. JPMorgan believes this may be related to the timing of staff cost allocations. Other net income also declined over the period because of lower VAT refunds.

Third-quarter wind power generation was approximately 12.6 billion kilowatt-hours, broadly flat year on year and better than the 6.7% decline in the first half. However, installed wind capacity rose 4.8% year on year to 33 gigawatts, and the additional capacity has yet to translate into a comparable increase in generation.
Over a longer period, wind power utilization hours fell 8.7% year on year to 1379 hours in the first nine months, which the report attributed to weaker wind resources and increased curtailment. While generation stabilized, falling electricity prices continued to weigh on wind power revenue.
Solar power provided a partial offset: installed solar capacity rose 26% year on year to 15 gigawatts in the third quarter, driving generation up 15% to 4.8 billion kilowatt-hours.

Subsidy receivables collected in the third quarter totaled 7.45 billion yuan, exceeding the combined 2.3 billion yuan collected in the first half of 2026 and continuing the trend of improvement since 2025 compared with earlier years.
Faster collection was a positive development this quarter, but it occurred alongside pressure on profit: lower electricity prices and higher costs remain the main factors JPMorgan cited to explain weaker earnings.

JPMorgan expects the results to trigger a negative share-price reaction and prompt the market to lower its earnings forecasts. At the same time, the bank believes the valuation is near historical lows and expects improved curtailment conditions in 2027 to drive a recovery in utilization hours, so it maintains its Overweight rating.
The bank set a price target of HK$7 for the end of 2027. Its target valuation uses a price-to-book multiple of 0.75 times and takes into account impairment risks from wind turbine upgrades and refurbishment. Changes in utilization hours, electricity prices and financing costs are the main variables affecting its rating and price target.