Operating in a complex industry environment in 1H26. SHNE recorded total revenue of RMB2.131 billion and net profit attributable to equity holders of RMB154 million. Gross margin stood at 43%. The short-term performance softness was primary driven by cyclical and regional industry headwinds—namely intensified curtailment constraints and softening market-oriented tariffs, compounded by lower YoY wind/solar resources. Furthermore, top-line fluctuations interacted with rigid baseline operating costs (cost of sales reached RMB1.21 billion, with depreciation and amortization accounting for ~70%), temporarily compressing margin space.

Despite periodic earnings volatility, clear pathways for medium-to-long-term performance recovery are taking shape:

Structural Relief via Grid Investment: Power absorption capacity is set for progressive enhancement backed by the planned RMB5 trillion grid investment during the 15th Five-Year Plan period (a RMB4 trillion increase over the 14th FYP). Given that curtailment imposes a dual drag on both power volume and localized tariffs, marginal grid improvements will generate substantial positive earnings leverage.

Potential Integrated "Renewable Energy +” Solutions: The company is actively building a robust pipeline for "Renewable Energy +” initiatives—including "Source-Grid-Load-Storage" integration, direct green power supply, and transport-energy synergy—with energy storage serving as the core supporting pillar. Once successfully rolled out, these solutions are expected to enhance onsite power consumption, stabilize realized power yields, and cushion against market-oriented tariff volatility.

High-Yield Wind Capacity Transition: Strategic expansion in high‑quality wind power will optimize the fleet mix and scale economies as pipeline projects gradually come online.

Accelerated wind power development with a well-structured project pipeline; rich reserves underpin long-term growth. The company continues to execute its strategy of "expanding wind power and stabilizing solar power." In 1H26, new project pipeline expansion delivered notable results. Projects are categorized into two tiers based on development progress—under construction and approved pending construction—offering clear stratification of project certainty. Projects under construction generally demonstrate high execution certainty, with a focus on key regions in Jiangsu and Shandong. Jiangsu: Includes the 18.8MW fishery-solar hybrid project in Hanjiang District, Yangzhou, and the 100MW fishery-solar-storage integration demonstration project in Yizheng, fostering integrated "Renewable Energy +" business formats. Shandong: Covers the 175MW distributed wind power project in Yuncheng and the 212.5MW wind power project in Mudan District, Heze, continuously consolidating the company’s core market presence within the province. Projects approved pending construction have mostly progressed smoothly through preliminary approvals, providing strong execution feasibility. These include the 100MW Phase II solar project in Hanbei Town, Wuxiang, Shanxi; the 100MW wind power project in Muge, Zhaoping, Guangxi; and the 287.5MW wind power project in Dingtao, Heze, Shandong. The company adheres to a selective development strategy for newly acquired project capacity indicators in 1H26. Meanwhile, leveraging the resource advantages of its controlling shareholder, Shandong Hi-Speed Group, the company can consolidate internal wind power projects within the group through M&A to achieve financial consolidation, further broadening capacity growth channels. As of the end of the reporting period, the company's total project reserves reached 7.865GW, laying a solid foundation for continuous long-term expansion in installed capacity.

Cost reduction and efficiency enhancement deliver outstanding results, and financial resilience continues to strengthen. The company adheres to the dual-driven strategy of high-quality development and cost reduction with efficiency improvement. On the financial front, the company continuously optimizes its financing structure by replacing high-cost borrowings with low-cost debt. Finance costs amounted to approximately RMB440 million during the reporting period, down 21.3% YoY, effectively hedging the impact on profitability. Administrative expenses decreased significantly YoY, with notable results from budget control. The balance sheet remains sound, with a period-end asset-liability ratio of 59. 9%, cash and cash equivalents of approximately RMB5.21 billion, and a current ratio of 1.68. Ample financial reserves provide solid support for subsequent project development. On the operation front, the company deepens intelligent O&M transformation, promotes unattended/less-staffed station management and preventive equipment maintenance. Through the synergy between production and trading, maintenance is precisely scheduled during periods of low tariffs or curtailment. Wind power utilization hours continue to outperform the national average, fully hedging against external environmental impacts.

In terms of valuation, the company's continuous capacity expansion, alongside near-to-mid-term energy storage serving as an operational buffer, lays the groundwork for a long-term turnaround against wind power tariff and curtailment headwinds.

Looking at future volume and price dynamics:

Short term: Power generation growth remains modest, while realized tariffs face downward pressure due to a higher share of market-oriented power trading.

Medium term: A concentrated wave of pipeline projects will come online, driving a significant surge in installed capacity, where economies of scale will partially offset unit tariff declines.

Long term: Downside risks from wind power curtailment and tariff caps are expected to reverse as grid infrastructure improves.

The company is accelerating its strategic pivot toward a dual-engine model focused on both “project development and grid connection”. It is actively establishing “Renewable Energy +” new business formats—including transport-energy synergy, Source-Grid-Load-Storage integration, and direct green power supply—to cultivate diversified profit drivers. The company’s stock is currently trading at HK$1.04, corresponding to a market capitalization of HK$2,336 million. We expect 27E/28E EPS of HK$0.08/0.11, implying forward P/E rate of 13x/9x —below the peer average of 18x/16x. This valuation discount presents an attractive entry point for investors, especially considering SHNE’s integration of transportation and energy, electricity-computing synergy, and continuous expansion of its renewable energy project reserve.

Risk Factors

Persistent wind power curtailment pressure; Downward pressure on comprehensive tariffs from new grid-connected projects.