Longyuan (0916): Model update and 3Q earnings preview

While we expect Longyuan's 3Q26 earnings to decline c.25% YoY to Rmb~830mn, this would represent a modest improvement from the 28% YoY decline reported in 1H26, supported by stabilizing wind generation and continued strong solar output. Wind generation was broadly flat YoY in 3Q26, improving from the 7% YoY decline seen in 1H26, while solar generation grew 15% YoY to 4.8bn kWh. Although realized power prices remain under pressure following the implementation of Doc 136, we believe the worst of the earnings reset may be behind the company. Looking ahead, accelerating energy storage deployment, ongoing grid expansion and slower renewable capacity additions should improve grid absorption and reduce curtailment, supporting a gradual recovery in earnings fundamentals in 2027. We maintain our FY26-28 earnings forecasts, roll forward our valuation horizon from Dec-26 to Dec-27, and keep our PT unchanged at HK$7.0.