Nationwide power grid investment in 2017 went down YoY by 2.2%. Nationwide power generating infrastructure investment in 2017 reached RMB 270 bn, down YoY by 20.8%; power grid investment fel slightly by 2.2% YoY to RMB 531.5 bn. We expect investment in conventiona power sources to continue the existing downtrend but power grid investment to maintain at above RMB 500 bn per year during the 13th Five-Year Plan period.
New orders from State Grid in 2017 dropped YoY by 24.3%. Wasion secured RMB 452.3 mn worth of new orders from the 2 centralized tenders on smart meters and data collection terminals from State Grids in 2017, down YoY by 24.3%. New orders from State Grid have been dropping since 2015, and the prospect for 2018 remains uite uncertain given the high penetration rate of smart meters in China presently.
ADO business and overseas markets are critica in maintaining the earnings of Wasion amid Power AMI sales decline. Power AMI sales dropped 21.2% YoY in 1H2017, while ADO sales and overseas sales grew rapidly by 35.8% YoY and 62.6% YoY, respectively. We believe that growth from ADO business and overseas sales wil continue to alleviate the pressure and impact brought by the declining Power AMI business going forward.
We slightly raise our TP to HKD 4.00 but maintain the "Neutral" investment rating. Our EPS forecasts for FY17 / FY18 / FY19 are RMB 0.280 / RMB 0.301 / RMB 0.313, respectively. The new TP corresponds to 11.6x / 10.8x / 10.4x FY17 / FY18 / FY19 PER or 0.8x FY17 / FY18 / FY19 PBR, respectively.