Earnings in 2016 went up YoY by 7.3%, in line with our previousexpectations. In 2016, sales and gross profit went down respectively by8.9% YoY and 6.6% YoY, but net profit went up by 7.3% YoY. Revenue in theChina market slid by 23.6% YoY while sales overseas jumped 43.3% YoY.We expect offshore markets to be more crucial going forward especially whenthe domestic market is getting saturated. The Company aims to ship 17GW ofwind gearbox in 2017, up by 17.2% from the 14.5GW delivered in 2016.
Non-core business segments will continue to be disposed of. The lossmaking Nanjing Marine subsidiary was disposed of in February 2017 at aconsideration of RMB 607 mn, recording a disposal gain of RMB 49 mn. Themanagement guided that it will focus all its resources to expand the wind gearbox business and dispose of other business segments when appropriate.
Earnings forecasts were adjusted under new assumptions. We haveadjusted our assumptions and earnings forecasts based on a slowdown indomestic demand and a rise in overseas sales. Our revised EPS from FY17to FY19 is RMB 0.748, RMB 0.810 and RMB 0.869, respectively.
We slightly cut our TP to HK$ 8.40 but maintain the “Accumulate”investment rating. The new TP corresponds to 10.0x / 9.2x / 8.6x FY17 toFY19 PER or 1.0x / 0.9x / 0.9x FY17 to FY19 PBR.