Net profit in 1H2019 increased YoY by 36.5% to RMB 730 mn. Sales,gross profit and net profit went down 4.4% YoY, up 26.3% YoY and up36.5% YoY, respectively. The operating result of Dongfang Electric in1H2019 was better than both the market and our expectation. Gross marginwent up YoY by 5.8 ppt to 24.0% while net margin was up by 1.4 ppt to4.6%. New orders in 1H2019 went up YoY by 13.6% to RMB19.26 bn,while total orders on hand at the end of June 2019 reached RMB88 bn.
Domestic power engineering investment in 7M2019 went up YoY by0.7% to RMB124.6 bn. In which, hydro and wind power engineeringinvestment in 7M2019 jumped YoY by 37.5% and 51.2%, respectively.
Renewable energies investment accounted for 83.1% of total powerengineering investments in 7M2019, up YoY by 8.4 ppt.
The existing wind power installation rush in China is expected to driveup both wind equipment demand as well as its price. For the periodfrom August 2018 to June 2019, the wind turbine price hike in China rangedbetween 7% and 12%. We expect the existing price uptrend to continue.
We reiterate the "Buy" rating and have adjusted our TP to HK$7.00.
Our revised EPS estimates from 2019 to 2021 are RMB0.532, RMB0.637and RMB0.735, respectively. Our new TP corresponds to 12.1x/ 10.0x/ 8.7xFY19/ FY20/ FY21 PER or 0.7x/ 0.6x/ 0.6x FY19/ FY20/ FY21 PBR.