Renewable energy is expected to increase its share of global primary energy consumption. According to British Petroleum (BP) forecasts, the share of renewable energy in global primary energy consumption is expected to increase from 2.8% in 2015 to 5.4% in 2025. The Global Wind Energy Association also predicts that the world's new wind power installations will reach 359 gigawatts between 2016 and 2020, which is equivalent to about 72 gigawatts of new wind power installed worldwide each year during the period.

China High Speed Transmission is the largest manufacturer of fan gearboxes in China. In 2015, it had a market share of more than 60% of the local fan gearbox market, and China's high speed transmission is also shifting its signs of development to overseas markets after experiencing saturation in the local market. Overseas revenue surged 58.4% and 69.5% year-on-year in 2015 and the first half of 2016, respectively.

Revenue, operating profit, and net shareholder profit are expected to achieve compound annual growth of 9.1%, 10.1%, and 11.3%, respectively, between the 2015-2018 fiscal years. Given the continued global investment in wind power and the decline in the company's debt ratio, we expect the company's revenue and earnings to grow steadily from 2016 to 2018. The net debt ratio is expected to be 60.5%/52.3%/46.0% for fiscal years 2016 to 2018, respectively.

We are giving China High Speed Transmission “Collection” investment rating for the first time, with a target price of HK$8.80. Our target price is equivalent to 10.9 times/10.0 times/8.9 times the 2016 to 2018 price-earnings ratio or 1.2 times/1.1 times/1.0 times the 2016 to 2018 net price-earnings ratio.