SUMMARY. 1H19 earnings missed due to unexpected high finance and admincosts. The Company is facing liquidity pressure as cash and EBITDA generationcannot cover short term borrowings. We believe market will focus on furtherassets disposal plan and GCL Poly （3800 HK）’s equity transaction with HuanengGroup. The upcoming transaction will be crucial for the survival of both GNE andGCL Poly. We suggest to wait for further catalysts from the transaction.
　　1H19 power generation surged 19.9%. Consolidated power generationrecorded 4,377GWh during 1H19, accounting for 53.5% of our full yearestimates. Based on the assumption that GNE will dispose 1.5GW solar farmassets in 2019, we believe 1H19 power generation was in line with expectation,and 2H19 power generation will likely to decline due to decreasing capacity.
　　1H19 results missed mainly due to surging finance costs. Revenue wasRMB3,173mn, up 17.3%. Solar tariff seemed lower as revenue growth wasslower than power generation growth. Administrative and finance costs camewith surprise, surging rapidly at 45.8% and 33.5% YoY to RMB373mn andRMB1,419mn, respectively. Non-recurring other gains from assets disposalbargain purchase and RMB appreciation totaled RMB140mn. Net profit wasRMB410mn, accounting for 44.4% of our FY19E estimates. Reverting nonrecurringitems, we estimate core earnings was down 51.5% YoY to RMB271mn.
　　Subsidy receivable expanded RMB2bn. Subsidy collection pace was stillslow in 1H19. Total subsidy receivable accumulated to RMB8.8bn, whichcontinue to add cash flow pressure to GNE.
　　Facing liquidity pressure. GNE’s total borrowings increased 3.9% toRMB42.3bn by 1H19. With more than RMB11.3bn debt mature in one year,GNE’s current cash level of RMB959mn and EBITDA of RMB2.96bn in 1H19would not be sufficient to cover those liabilities. Therefore, we expect marketwill look forward to further assets disposal, and focus on the Huaneng deal.
　　According to GNE, deal diligence was finished, and GNE is negotiating withHuaneng for asset pricing and terms.
　　Cut TP to HK$0.31, maintain HOLD. Based on higher-than-expected financecosts and revised effective tax rate, we revise GNE’s 2019E-21E EPS forecastby -29.2%/-6.0%/+30.0% respectively to RMB 3.4/3.8/4.1 cents respectively.
　　Our DCF TP is cut by 13.9% to HK$0.31 per share. Maintain HOLD.