9M2019 net earnings increased by 13.5% YoY to RMB1,035 mn.
　　Quarterly sales and net earnings in 3Q2019 went up YoY by 26.9% anddown YoY by 19.0%, respectively. The earnings during the first 3 quartersmissed expectation due to the worse-than-expected 3Q2019 results. Grossmargin in 9M2019 went up by 4.0 ppt YoY to 24.4%, while net margin wasup 0.4 ppt YoY to 4.5%. New orders in 9M2019 went up YoY by 14.4% toRMB26.12 bn, with export orders contributing 11.1% of total new orders.
Nationwide newly installed power generating capacity in 9M2019reached 64.6 GW, down YoY by 20.4%. Thermal, hydro, nuclear, windand solar contributed 28.5 GW, 2.8 GW, 4.1 GW, 13.1 GW and 16.1 GW,respectively, of newly installed capacity in the first 9 months of 2019,implying YoY growth of +19.7%/ -58.0%/ +18.2%/ +3.7%/ -53.3%,respectively. Renewable energies made up 56% of newly installed powercapacity in China in 9M2019.
We maintain the investment rating of "Buy" but cut our TP to HK$6.35.
　　We expect revenues to increase YoY by 0.4%/ 3.2%/ 4.6% from 2019 to2021, respectively. The consolidated gross margin of Dongfang Electric isset to gradually recover and therefore is estimated to be 26.4%/ 27.4%/28.1% from 2019 to 2021, respectively. Our revised EPS estimates from2019 to 2021 are RMB0.434, RMB0.580 and RMB0.653, respectively. Ournew TP corresponds to 13.2x/ 10.0x/ 8.8x FY19 to FY21 PER or 0.6x/ 0.6x/0.5x FY19 to FY21 PBR.