Net earnings in 2019 surged YoY by 11.0% to RMB5,072 mn, beatingexpectations. Sales and net earnings in 2019 went up YoY by 10.4% and11.0%, respectively. Net profit during the period was approximately 11.0%above market consensus estimate. Consolidated gross margin in 2019 wasdown slightly by 0.2 ppt to 13.1% but net margin stayed relatively flat at 2.1%.
　　Due to COVID-19, The Company issued a profit warning indicating that its netprofit in the first quarter of 2020 will record a net loss of at most RMB350 mn.
Newly signed contracts in the first quarter of 2020 reached RMB127.706bn, up YoY by 0.7%. Domestic new contracts in 1Q2020 amounted to RMB59.936 bn, down 7.0% YoY, while newly signed overseas contracts reachedRMB67.770 bn, up 8.5% YoY. The Company had orders backlog ofRMB1,208 bn at the end of 2019.
We expect domestic power sector investment to speed up entering thesecond quarter of 2020. Nationwide power sector investment in 2M2020reached RMB35.5 bn, down YoY by 27.1%. Of which, power engineeringinvestment went down YoY by 10.7% to RMB21.7 bn while power gridinvestment was down YoY by 43.4% to RMB13.8 bn. We expect domesticpower sector investment in 2020 to hit RMB900 bn, up 12.6% YoY.
We maintain the "Accumulate" investment rating and TP of HK$1.00.
　　Affected by COVID-19, we have trimmed our earnings forecast in 2020; ourEPS estimates from FY20 to FY22 are RMB0.152/ RMB0.185/ RMB0.206,respectively. The TP translates to 6.0x/ 4.9x/ 4.4x FY20-FY22 PER or 0.5x/0.5x/ 0.4x FY20-FY22 PBR.