Shanghai Electric has reported 3Q26 results. For 9M26, revenue rose 18.35% YoY to RMB97,612mn, with the attributable net profit up 16.70% YoY to RMB1,243mn. In 3Q26, revenue was RMB34,280mn, up 22.55% YoY but down 12.13% QoQ; the attributable net profit was RMB273mn, up 11.46% YoY but down 53.75% QoQ. In our view, as one of China's "Big Three" traditional power equipment makers, Shanghai Electric is well positioned to benefit from domestic demand for coal, nuclear, and gas-fired power equipment, as well as potential gas turbine export opportunities from overseas power shortages. Its expansion into power transmission and distribution, energy storage, and industrial intelligent equipment may add diversified growth potential, in our view. We maintain our A/H target prices of RMB7.25/HKD5.39 and our BUY rating.
We trim our 2026/2027/2028 EBITDA estimates by 3%/4%/5% to RMB9,459/11,424/13,191mn and attributable net profit estimates by 5%/6%/6% to RMB1,427/2,081/2,811mn, mainly on lower wind power gross margin assumptions and adjusted gas turbine profit contribution based on order intake. This implies EPS of RMB0.09/0.13/0.18. For the A-share, we use SOTP valuation. A-share peers in energy equipment & integrated services/industrial equipment trade at 2027E average EV/EBITDA of 12.67x/18.13x on Wind consensus. Given the company's overseas expansion in industrial equipment and power equipment is still at an early stage, we apply 2027E EV/EBITDA of 11.40x/16.32x to its energy equipment & integrated services/industrial equipment segments (10% valuation discount; previous: 2026E 16.12x and 21.96x), arriving at a target price of RMB7.25 (previous: RMB8.55). For the H-share, we use global power equipment and industrial equipment leaders as peers, which trade at 2027E average EV/EBITDA of 12.19x on Visible Alpha consensus. Considering the company is still at an early stage in global footprint and data center business relative to overseas leaders, we apply 2027E EV/EBITDA of 9.15x (25% valuation discount; previous: 2026E 14x), arriving at an H-share target price of HKD5.39 (previous: HKD7.17).