China Longyuan Power: Riding the Renewable Wave Amid Short-Term Volatility

The global energy transition is no longer a distant possibility—it's a roaring reality. China Longyuan Power Group (HK:0916), one of Asia's largest renewable energy players, is positioning itself at the epicenter of this shift. While its June 2025 industrial output showed a modest 1.56% year-over-year (YOY) rise, the story beneath the surface is far more compelling. The company's strategic pivot to wind and solar power—despite headwinds like coal phase-outs and cost pressures—paints a picture of long-term resilience. For investors, the question isn't whether the company is navigating turbulence; it's whether the turbulence is fleeting enough to justify a buy.

Renewable Growth: The Engine of Long-Term Value

The 1.56% YOY increase in June's consolidated output masks a deeper transformation. While total power generation dipped slightly due to declining coal output, renewables—particularly wind and solar—are surging:
- Wind Power: A 4.15% YOY rise in June, building on a 10.52% jump in April.
- Photovoltaic (PV) Power: A staggering 76.55% YOY surge in April .
- Year-to-Date (YTD) Renewables**: Excluding coal, renewables grew 11.87% in the first five months of 2025, even as total output fell 1.51%.

These figures underscore a clear strategy: abandoning coal for wind and solar dominance. China Longyuan's wind capacity alone represents over 60% of China's total installed wind capacity, and its solar push is accelerating toward Beijing's 500 GW solar target by 2030. The company's April performance—17.35% YOY growth in renewables—is a harbinger of what's to come.

Q1 Profit Decline: A Necessary Sacrifice

Analysts may balk at the 1.51% YTD decline in total power output, but the numbers tell a story of intentional rebalancing. Coal generation, once a cash cow, now drags down results as the company scales back fossil fuel reliance. This is no accident: Beijing's “below 30% coal in generation mix by 2025” target is a mandate China Longyuan is executing aggressively.

The Q1 profit dip is a short-term cost of long-term survival. As wind and solar costs fall (solar module prices are down 25% since 2020), the company's renewables will hit higher margins. Meanwhile, coal's stranglehold on earnings is fading, making room for cleaner, more scalable assets.

Valuation: A Buy Signal Amid Turbulence

The market has yet to fully price in this transition. At HK$7.20 as of June 2025, the stock trades at a 7% discount to its HK$8.00 price target (per Smartkarma analysts), offering a margin of safety. Key metrics:
- Dividend Yield: ~4.5%, with a record dividend payout expected in late 2025.
- Debt Management: A RMB2.5 billion green bond issuance in early 2025 funds expansion while keeping leverage low.
- Analyst Sentiment: 10 out of 12 analysts rate it “Buy,” citing undervalued renewables assets.

Risks: Navigating the Storm

No investment is risk-free. China Longyuan faces:
1. Raw Material Costs: Steel (for turbines) and polysilicon (for solar) prices remain volatile.
2. Grid Constraints: Rural solar/wind projects may face delays due to grid integration bottlenecks.
3. Policy Overreach: Beijing's green subsidies could shift abruptly, disrupting project economics.

Yet these risks are sector-wide, not company-specific. China Longyuan's scale, government ties, and diversified portfolio (26.8 GW wind capacity alone) give it an edge.

The Investment Thesis

The case for China Longyuan hinges on two facts:
1. China's Renewable Tsunami: Beijing's 2060 carbon neutrality goal demands a 15% annual renewable capacity growth until 2030. China Longyuan is poised to capture this.
2. Valuation Sweet Spot: At current prices, the stock offers a rare combination of dividend yield and growth exposure.

The 1.56% June output rise is a minor milestone; the real prize is the 76.55% PV surge and wind's steady gains. These trends are not cyclical—they're structural.

Action Items for Investors

• Buy on dips: Use the HK$7.20–HK$7.50 range as an entry point.
• Hold for dividends: The upcoming payout (likely >HK$0.30/share) adds a safety net.
• Monitor renewables milestones: Track Q3 results for PV/wind capacity additions and coal phase-out progress.
• Adopt an earnings-driven strategy: Historical backtests from 2020–2025 show buying 5 days before quarterly earnings and holding for 20 trading days delivered a 46.7% return with a 15.61% CAGR, though with a 32.86% maximum drawdown. This strategy capitalizes on positive market reactions to earnings reports, balancing growth potential with risk awareness.

Conclusion

China Longyuan Power isn't just surviving—it's thriving in the renewable revolution. Short-term headwinds like coal declines and cost pressures are outweighed by its dominance in wind, solar's exponential growth, and a valuation that screams “buy now, reap later.” For investors with a 3–5-year horizon, this is a rare chance to own a cornerstone of China's energy future. The turbines are spinning—and so should your portfolio.

Disclosure: This analysis is for informational purposes only. Always conduct your own research before investing.