Quarterly net earnings in 3Q2019 went up YoY by 2.6% to RMB1,030mm. The Company's 3Q2019 performance contributed positively to theoperating results in 9M2019. Net earnings in 9M2019 dropped YoY by 3.3%YoY, and the decline narrowed by 2.6 ppt from 5.9% seen in 1H2019.
Consolidated gross margin in 3Q2019 went up YoY by 1.2 ppt to 15.0%,driving the gross margin in 9M2019 to increase by 0.5 ppt YoY to 13.3%.The operating result during the first 9 months met our expectation.
Quarterly new contracts signed in 3Q2019 went up by 30.8% YoY andreached RMB81.8 bn. Following recording a 19.8% YoY increase in theamount of new contracts secured in 2Q2019, the new contracts signed in the3Q2019 further went up by 30.8% YoY and reached RMB81.763 bn. Thestrong growth in new orders in both 2Q2019 and 3Q2019 were the keyreasons behind the 11.7% YoY growth in new contracts in 9M2019. TheCompany had orders backlog in excess of RMB1.2 tn by June 2019.
Power engineering investment in China in 9M2019 reached RMB179.7bn, up YoY by 6.0%. Among which, thermal, hydro, nuclear and wind powerengineering investment in 9M2019 went down YoY by 28.9%, up YoY by30.2%, down YoY by 29.7% and up YoY by 72.8%, respectively.
We maintain the "Accumulate" investment rating and TP of HK$1.00.
Our EPS estimates from FY19 to FY21 are RMB 0.147, RMB 0.185 and RMB0.197, respectively. The TP translates to 6.0x/ 5.0x/ 4.6x FY19-FY21 PER or0.5x/ 0.5x/ 0.5x FY19-FY21 PBR.