Daiwa Research raised its target price for China Datang Corp Renewable Power (01798) to HK$0.95 from HK$0.8 and upgraded its rating to "outperform" from "hold".
The research house said Datang's share price has risen by 15% since 3 October when Huaneng Renewables (00958) announced its privatisation offer price, possibly due to investor speculation on Datang being the next privatisation target within the wind sector.
Daiwa thinks privatisation would make sense given its 2020 PBR is currently still distressed at 0.4x compared to peers' (0.5-0.8x). Datang's 1H earnings missed on rising
operating expenses and finance costs, and Daiwa sees its capex rising from CNY2.3bn in 2018 to CNY7.4-9.6bn in 2019-21 to add 1.0-1.3GW pa of new wind power capacity before the expiry of subsidy tariffs, putting FCF under pressure.