Assessing CGN New Energy (SEHK:1811)’s Valuation After Its New Three-Year Maintenance Services Framework Deal

CGN New Energy Holdings (SEHK:1811) just signed a three year Maintenance Services Framework Agreement through its Yunnan subsidiary, formalising repair and testing work across wind, solar and energy storage assets within the CGN group.

See our latest analysis for CGN New Energy Holdings.

Against this backdrop, the HK$2.65 share price has seen a solid year to date, with a 13.25 percent year to date share price return and a standout 5 year total shareholder return of 190.96 percent, suggesting momentum is still broadly constructive as CGN New Energy leans further into long term service revenue.

If this kind of contract driven story has your attention, it could be a good moment to explore other renewable focused utilities and infrastructure names using our screener for fast growing stocks with high insider ownership.

With earnings still growing steadily, a value score on the low side and the shares trading at a material discount to analyst targets, is CGN New Energy still a mispriced transition play, or is the market already baking in years of growth?

Price to Earnings of 6.4x: Is it justified?

At the last close of HK$2.65, CGN New Energy trades on a 6.4x price to earnings multiple that screens as inexpensive versus both the Hong Kong market and its direct peers.

The price to earnings ratio compares what investors are paying today for each unit of current earnings. This can make it a useful yardstick for a mature, cash generative utility with steady but unspectacular growth prospects. For CGN New Energy, this multiple effectively packages the market’s expectations for future profit expansion and balance sheet risk into a single headline number.

On several fronts, the comparison looks favourable. The shares trade below the wider Hong Kong market multiple of 12.3x, below the Asian renewable energy peer average of 7.7x, and below an estimated fair price to earnings level of 9.7x. This gap points to meaningful rerating potential if earnings and cash flows stay on their current trajectory.

Explore the SWS fair ratio for CGN New Energy Holdings

Result: Price to Earnings of 6.4x (UNDERVALUED)

However, investors should watch for policy shifts in China’s power markets and potential project delays, either of which could pressure margins and derail rerating expectations.

Find out about the key risks to this CGN New Energy Holdings narrative.

Another View on Value

While the 6.4x earnings multiple hints at upside, our DCF model is more cautious, putting fair value nearer HK$2.12, which makes the current price look a bit rich. Is the market overestimating long term cash generation, or is the model too conservative on policy and funding risk?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CGN New Energy Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 935 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own CGN New Energy Holdings Narrative

If you see the numbers differently or want to stress test your own assumptions, you can build a personalised view in just a few minutes: Do it your way.

A great starting point for your CGN New Energy Holdings research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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