CLP’s 1H2018 results beat market expectations and were basically inline with our estimates. Revenue increased 7.2% YoY to HK$ 46,464 mn,operating earnings increased 33.3% YoY to HK$ 7,886 mn and DPS reachedHK$ 1.22 per share, up 3.4% YoY. Earnings growth was driven by higherearnings in Australia and mainland China, underpinned by stable growth inHong Kong.
We revise 2018E-2020E shareholders’ profit by （3.8%）/ （4.4%）/ （7.2%） toHK$ 15,108 mn/ HK$ 14,367 mn/ HK$ 14,480 mn. We have adjusteddownward our earnings forecasts relative to revenue due to higher expectedfinancing and fuel costs despite additional earnings contribution from newacquisitions such as Yangjiang nuclear. The new Scheme of Control （"SoC"）agreement will have an immediate impact on 2019E earnings, after which weexpect earnings to stabilize before returning to gradual growth.
Raise TP to HK$95.00 and maintain investment rating, "Accumulate".The TP represents 15.9x/16.7x/16.6x 2018E-2020E PER and corresponds to1.9x/1.8x/1.7x 2018E-2020E PBR. We have raised the TP despite loweringour earnings estimates based on the 2018E-2020E weighted averageHK-listed peers PER of 15.3x/16.7x/16.1x and a higher DCF derived NAV.Despite a decrease in future expected earnings due to the commencement ofthe Hong Kong SoC agreement, we believe the Company remains as anattractive defensive investment that offers predictable earnings and stabledividend growth.