On August 25, Dongfang Electric (HKEX: 01072) released its unaudited interim results for the first half of 2026. The company's core energy equipment manufacturing business performed strongly, with net profit attributable to shareholders recording substantial growth. However, due to seasonal factors in its wind power segment, the company experienced a significant net cash outflow from operating activities.
Following the earnings disclosure, the company's H-shares closed down 3.6% on August 26, while its A-shares, Dongfang Electric Corporation Limited (SH: 600875), edged up 0.63%. According to the interim results announcement filed with the Hong Kong Stock Exchange, for the six months ended June 30, 2026, the Group achieved total operating revenue of RMB 38.624 billion, a year-on-year increase of 1.24%. Profit attributable to owners of the company for the period reached RMB 2.713 billion, up 42.07% year-on-year. After deducting non-recurring items, net profit attributable to shareholders was RMB 2.366 billion, an increase of 30.96%. Basic and diluted earnings per share stood at RMB 0.78. The board has resolved not to declare an interim dividend for the first half of 2026.
During the first half, the company's energy equipment manufacturing segment generated revenue of RMB 29.446 billion, up 3.96% year-on-year, with a gross margin of 14.08%. The coal power, gas power, and hydropower businesses all achieved year-on-year growth, with the gas power segment maintaining its top market share domestically. This remains the core revenue foundation for the Group.
The manufacturing services segment recorded revenue of RMB 6.271 billion in the first half, a decrease of 11.86% year-on-year, with a gross margin of 32.63%. A decline in engineering-related business revenue contributed to the segment's overall decrease.
The emerging industries segment posted revenue of RMB 2.907 billion in the first half, up 7.18% year-on-year, with a gross margin of 11.02%. While energy storage, hydrogen energy, and energy conservation and environmental protection businesses achieved scale growth, intensified competition in areas such as industrial drives dampened the segment's overall profitability.
Regarding key financial and operational indicators, financial expenses for the first half amounted to RMB 125 million, compared to a negative RMB 4 million in the same period last year, primarily due to an increase in net foreign exchange losses. R&D expenses were RMB 1.417 billion, down 9.75% year-on-year, mainly reflecting lower material costs for certain R&D projects. Net cash flow from operating activities was a negative RMB 1.722 billion, compared with a negative RMB 556 million in the prior year period. The expanded net outflow was primarily attributed to seasonal collection patterns in the wind power business. Net cash flow from investing activities was RMB 3.826 billion, mainly stemming from the recovery of interbank certificates of deposit held by its finance company.
As of the period end, the Group's debt-to-asset ratio stood at 70.18%, a slight decrease of 0.21 percentage points from 70.39% at the end of 2025. The company held RMB 27.549 billion in monetary funds, indicating ample cash reserves.
Where to begin
Dongfang Electric is a leading domestic energy equipment manufacturer, operating under a "one core, two wings" business structure. The core business covers complete power generation equipment for hydropower, thermal power, nuclear power, and wind power. The two wings consist of manufacturing services and emerging industries such as energy storage and hydrogen energy. Its products and services are sold to numerous countries and regions worldwide, benefiting from the domestic construction of new power systems and the continuous expansion of wind, solar, and nuclear power installations.
The company is also venturing into new arenas like electrolytic water hydrogen production, molten salt energy storage, and industrial drives, while advancing overseas market expansion. However, these emerging industries are still in a cultivation phase characterized by intense market competition.
Some analysts suggest that in this performance, the company's overall revenue growth was relatively weak. The sustained substantial net cash outflows from operating activities, coupled with seasonal collections in the wind power business and capital tied up in inventory and receivables, warrant continued monitoring for future improvements in cash collection. Furthermore, the equipment manufacturing industry involves significant capital expenditure and lengthy project delivery and settlement cycles. The company also faces multiple uncertainties including overseas geopolitical risks, exchange rate fluctuations, and foreign compliance requirements, which may be key areas for investors to focus on.
It is worth noting that as a representative A+H listed central state-owned enterprise in the domestic energy equipment field, whether Dongfang Electric will be favored by the selection committee of the Hong Kong Top 100 Research Center and make it onto the candidate list for the 13th Hong Kong Top 100 companies selection remains a point of anticipation for the market. It is understood that preparations for the 13th edition of this selection are now underway, with registration channels for various candidate lists open simultaneously.