1H17 earnings went up YoY by 6.5%, better than expectation. Sales andnet profit in 1H17 went down YoY by 2.0% and up YoY by 9.5%, respectively.
　　The rise in earnings was mainly due to gross margin recovery and lower taxexpense during the period. Gross margin in 1H17 increased YoY by 0.9 ppt to19.0% and net margin was up YoY by 0.4 ppt to 3.8%.
　　New orders went down YoY by 26.1% to RMB 50.3 bn. The Companysigned RMB 50.3 bn in new orders in 1H17, down sharply by 26.1% YoY, andorders on hand reached RMB 248 bn （with RMB 101.4 bn of orders not yetcoming into effect）， up YoY by 1.6%. High efficiency & clean energyequipment （thermal） new orders in 1H17 went down significantly by 45.5%.
　　Power generating infrastructure investment in China in 7M2017 wasdown YoY by 13.7% to RMB 125.5 bn. In 7M2017, newly installed powercapacity in China reached 68.8 GW, up YoY by 6.3%, but new thermal powerinstallations went down YoY by 33.1% to 18.8 GW. Power generatinginfrastructure investment in 7M2017 was down 13.7% to RMB 125.5 bn.
　　Under stricter control from the government, we expect China’s investment inthermal power to continue shrinking.
　　We maintain the investment rating of “Accumulate” and raise our TP toHK$ 4.75. We maintain our bullish view on the outlook of Shanghai Electricgiven its market leading position and the ongoing SOE reforms aiming totransform and drive continued growth of the Company. New TP correspondsto 21.8x / 20.0x / 18.9x FY17-FY19 PER or 1.2x / 1.1x / 1.1x FY17-FY19PBR.