Dongfang Electric stock initiated with Buy rating at UBS on nuclear growth

UBS initiated coverage on Dongfang Electric Corp (SS:600875) with a Buy rating and a RMB28.90 price target, designating the Chinese power equipment manufacturer as a sector top pick. The firm projects a 27% earnings per share compound annual growth rate for Dongfang Electric from 2024 to 2029, driven by scaling high-margin maintenance services and a multi-year nuclear equipment upcycle, with their 2025-2027 EPS estimates 4-29% above consensus. UBS underscored the stock's attractive valuation at 13 times 2026 estimated price-to-earnings, significantly below the 44 times average for global peers, citing stronger earnings visibility.

Analysis

UBS has initiated coverage on Dongfang Electric Corp (SS:600875) with a Buy rating and a RMB28.90 price target, identifying it as a sector top pick. The basis for this bullish outlook is a significant projected acceleration in earnings growth, with UBS forecasting a 27% earnings per share compound annual growth rate from 2024 to 2029, a substantial increase from the 11% CAGR recorded between 2020 and 2024. This growth is expected to be driven by the expansion of high-margin maintenance services, a sustained upcycle in the nuclear equipment sector, and future potential from next-generation technologies. Notably, UBS's earnings estimates for 2025-2027 are 4-29% above market consensus, suggesting a contrarian viewpoint on the company's prospects. The valuation case is particularly compelling, as the stock trades at 13 times its estimated 2026 price-to-earnings ratio, which represents a steep discount to the 44 times average for its global peers, highlighting a potential re-rating opportunity should the firm's growth thesis materialize.

Key Decisions for Investors

• Investors should evaluate Dongfang Electric as a potential long position, given the strong buy-side initiation, above-consensus earnings forecasts, and significant valuation discount to global peers.
• Monitor the company's reported growth in maintenance services revenue and new orders within its nuclear division, as these are the core catalysts underpinning the projected 27% EPS CAGR.
• Consider the 13x forward P/E ratio relative to the 44x peer average as a key part of the investment thesis, weighing the potential for a valuation re-rating against any implicit country-specific or geopolitical risks not detailed in the report.