2018 earnings went up YoY by 13.5%, in line with expectation. Sales andnet profit in 2018 went up YoY by 27.2% and 13.5%, respectively. Operatingresults in 2018 were in line with the market and our expectation. Gross marginin 2018 went down YoY by 1.7 ppt to 18.2%, mainly due to gross margindecline in 3 out of 4 business segments. Net margin in 2018 was downslightly by 0.4 ppt YoY to 2.9%.
New orders in 2018 went up sharply by 30.1% YoY. New orders went upsignificantly by 30.1% YoY in 2018 to RMB 130.71 bn, implying that newlysigned orders in the 4th quarter of 2018 jumped significantly by 66.3% YoYand reached RMB 40.41 bn. Orders on hand amounted to RMB 206.99 bn（with orders of RMB 86.21 bn not yet coming into effect） by the end of thereporting period, down YoY by 8.8%.
We expect newly installed power capacity in China to be approximately118 GW in 2019, down YoY by 5.1%. In which, thermal, hydro, nuclear, windand solar are expected to contribute 35GW, 10GW, 8GW, 25GW and 40GW,respectively, of new power capacity additions in 2019. Non-hydro renewableenergy installation is expected to be between 70GW and 80GW per year from2019 to 2020.
We reiterate the "Buy" rating and raise the TP to HK$ 3.80. We remainconfident on the outlook of Shanghai Electric given its continued reform andtransformation. Our TP corresponds to 15.0x/ 12.7x/ 11.7x FY19-FY21 PERor 0.8x/ 0.8x/ 0.8x FY19-FY21 PBR.