CMB International's initial purchase rating for United PV (00686.HK). Based on discounted cash flow estimates, the bank estimates the share price of United PV at HK$1.65; predicts earnings per share of RMB 0.114 in 2016, referring to the average of 9.6 times PE in the Hong Kong stock industry in 2016. The bank estimates a fair share price of HK$1.34. Based on the above two valuation methods, a target price of HK$1.49 was given, covering the first rated purchase. United PV is an investment operator focusing on solar power plants. Since 2013, the company began investing in PV through mergers and acquisitions of power plant assets, and has skipped the power plant development cycle and achieved rapid capacity expansion. The company acquired 4 projects in 2013, obtained 133 MW of installed capacity, then accelerated expansion to have 15 projects with a total installed capacity of 517 MW at the end of 2014. The bank expects United PV's installed capacity to grow to 1,343 megawatts by the end of 2015, with a compound growth rate of 218% in power plant assets in 2013-15. Strong financing capacity and abundant project reserves Photovoltaic power plant projects require huge capital investment. With the support of China Merchants Renewable Energy and China Merchants Bureau as the controlling shareholder of a state-owned enterprise, United PV has demonstrated its strong financing capabilities by issuing more than 1.35 billion (RMB, same below) of convertible bonds and obtaining bank loans with favorable conditions. The company has also formed strategic partnerships with industry-leading photovoltaic power plant developers, state-owned enterprise project companies, and photovoltaic power plant development organizations to lock in project reserves for long-term development. So far in 2015, the company has announced plans to acquire and develop 1.43 gigawatts and has project cooperation agreements for more than 27 gigawatts. Revenue is growing strongly, and operating margins can be increased. Thanks to the rapid expansion of power plant assets, the company's revenue increased 1,289% in 2014. The bank expects revenue to grow 83% to $760 million in 2015, then to $1.89 billion and $2.46 billion in 2016 and 2017, respectively, increasing 146% and 30% year-on-year. The bank expects the profit margin before interest and tax to grow from 31% in 2014 to 52% in 2015, and to more than 60% after 2016, mainly due to the company's asset growth rate relatively faster than depreciation, stable maintenance costs, and a decrease in employee benefit expenses as a share of revenue. High debt ratios may slow down the pace of expansion, and the rapid growth of joint photovoltaic power plant assets is also accompanied by a rapid increase in balance ratios. The bank predicts that the balance ratio will rise to 85% in 2015, while the net financial leverage ratio will also rise rapidly to 446%. Expansion under high debt will not last long, and the speed of the new round of power plant capacity growth will depend on when the company can reduce its leverage ratio to a healthier level.