The results in 2021 missed expectation. Revenue in 2021 dropped 10.7%YoY to RMB21,225 mn and the net loss widened from RMB7,3 mn in 2020 to RMB4,142 mn in 2021. Key reasons behind the sharp fall in earnings during the period include the significant fall in the gross margin of key business segments and the large losses incurred by the overseas EPC projects due to the dramatic rise in execution costs. Consolidated gross margin of Harbin Electric went down YoY by 16.0 ppt to -4.6% in 2021 as margin decline was seen in all business segments during the period. New orders secured in 2021reached RMB28.582 bn, up YoY by 5.5%. Among which, thermal, hydro, nuclear, power plant engineering, power station service, and other products contributed 33.1%,11.1%,11.0%,14.4%,14.2% and 16.2%, respectively.
Favorable industry policies set to boost growth in next few years. The NEA of China promulgated the "Notice on the Rehabilitation and Upgrading of Coal-fired Power Plants Nationvide"and the "Pumped Storage Project Mid-and Long-Term Development Plan (2021-2035)"in 2021. We expect domestic demand for power plant engineering services and conventional power equipment to surge in the next few years as a result of favorable industry policies promulgated by the Chinese govermment.
We downgrade the investment rating to "Accumulate"and adjust our TP to HK$2.95. We remain optimistic about the outlook of Harbin Electric amid favorable industry policies issued by the govemment. Our revised EPS forecasts from 2022 to 2024 are RMB0,081, RMB0.135 and RMB0.159. respectively. Our new TP translates to 29.7x/17.7x/15.1× 2022-2024 PER or0.4x/0.3x/0.3×2022-2024PBR, respectively.