1Q2019 earnings went up YoY by 16.0%, in line with our expectation.Sales and net earnings in 1Q2019 went up YoY by 11.4% and 16.0%,respectively. 1Q2019 gross margin was down by 0.8 ppt YoY to 19.9%, whilenet margin remained flat at 3.7%. 1Q2019 net profit reached RMB762 mn andwas approximately 24% of our full-year earnings forecast for 2019. Netearnings result in 1Q2019 was better than market expectation but in line withour expectation.
New orders in 1Q2019 went up by 19.1% YoY. New orders in 1Q2019reached RMB31.06 bn, up sharply by 19.1% YoY. Orders on hand at the endof the period amounted to RMB239.65 bn （with orders in the amount ofRMB88.29 bn not yet coming into effect）， up YoY by 4.1%. In which, backlogorders of wind power equipment reached RMB21 bn, up 0.8% YoY, while thatof power plant engineering amounted to RMB64.2 bn, up 5.3% YoY.
We expect domestic newly installed power capacity in 2019 to beapproximately 101 GW, down YoY by 18.8%. Thermal, hydro, nuclear, windand solar are expected to contribute 30 GW, 8 GW, 8 GW, 25 GW and 30GW, respectively, of new power capacity additions in 2019. We expectnon-hydro renewable energy installation to be between 60 GW and 70 GWper year from 2019 to 2020.
We reiterate the "Buy" rating and TP of HK$3.80. We remain confident onthe outlook of Shanghai Electric and maintain our current earnings estimates.
Our TP of HK$3.80 corresponds to 15.5x/ 13.1x/ 12.1x FY19-FY21 PER or0.8x/ 0.8x/ 0.8x FY19-FY21 PBR.