Analyst insights from Citigroup have led to revised earnings forecasts for Dongfang Electric Corporation Limited (HKG: 01072). The bank has adjusted its profit projections for the years 2026 through 2028 downward by 1% to 6%. This revision accounts for more conservative assumptions regarding the company's future revenue and profit margins. Consequently, Citigroup has reduced its target price for the stock from HK$54 to HK$30. Despite this adjustment, the firm continues to endorse the shares with a 'Buy' rating.
Citigroup suggests that the stock's recent pullback over the past months may be attributed to the market adopting a more realistic outlook on the revenue contribution from the company's gas turbine exports. However, the company's operational performance since the start of the year has remained solid.
The report highlights that new orders received in the first five months of 2026 increased by 10% year-over-year, aligning with the company's full-year objectives. Furthermore, the backlog of orders as of the end of May grew by 7%, reaching a total of RMB 150 billion.
Investment Rationale and Valuation
Due to its highly diversified product portfolio, Dongfang Electric remains Citigroup's top pick within China's power generation equipment sector. The bank contends that the current valuation, trading at approximately 11.2 times estimated earnings for 2027, is not considered excessive.
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