9M2018 earnings went up YoY by 15.5%, better than market expectation.Sales and net profit in 9M2018 went up YoY by 19.2% and 15.5%,respectively. Quarterly earnings in 3Q2018 jumped 28.0% YoY. Operatingresults in 9M2018 were better than market expectation. Gross margin in9M2018 went down YoY by 2.2 ppt to 20.0% and net margin was down YoYby 0.1 ppt to 3.1%.
New orders in 9M2018 went up YoY by 18.6%. New orders secured in9M2018 reached RMB 90.3 bn, up YoY by 18.6%, and orders on handreached RMB 228.4 bn （including RMB 106.4 bn in orders not yet coming intoeffect）， which was relatively flat compared to that at year end 2017. Neworders of new energy equipment and modern services went up YoY by 22.7%and 59.5%, respectively.
Power generating infrastructure investment in China in 9M2018 reachedRMB 169.6 bn, down YoY by 1.9%. In 9M2018, newly installed powercapacity in China reached 81.1 GW, down YoY by 13.1%. Newly installedthermal and hydro during the period dropped YoY by 23.2% and 19.0%,respectively. However, newly installed nuclear and wind capacity increased59.1% YoY and 30.0% YoY, respectively. We expect China’s investment inrenewable energies to continue to accelerate going forward.
We reiterate the "Buy" rating and the TP of HK$ 3.63. We maintain ourbullish view on Shanghai Electric given its continued reform and corporatetransformation. Our TP corresponds to 15.4x/ 13.6x/ 12.6x FY18-FY20 PERor 0.9x/ 0.8x/ 0.8x FY18-FY20 PBR.