Main points of investment

The income from electricity charges is growing rapidly. In the first half of 2016, the company achieved operating income of 452 million yuan, an increase of 59.8 percent over the same period last year (first half of 2015: 283 million yuan), EBITDA of 376 million yuan, an increase of 77.2 percent (first half of 2015: 212 million yuan), and net profit attributable to shareholders of 249 million yuan, an increase of 2.5 percent over the same period last year (first half of 2015: 243 million yuan). In the first half of the year, the company's basic and diluted EPS were RMB 5.22 and 3.73 respectively, down 6.8 per cent and 3.6 per cent respectively compared with the same period last year. The year-on-year increase in the company's performance in the first half of the year is mainly due to the rapid growth of power generation due to the increase in the capacity of grid-connected power stations, which leads to the rapid growth of electricity sales and electricity price subsidies compared with the same period last year; however, due to many fair value changes, the net profit belonging to shareholders is basically flat.

The capacity of grid-connected power stations continues to grow, and the power generation increases rapidly. By the end of the first half of 2016, the company had 26 photovoltaic power stations with a total installed capacity of 996MW, with a new installed capacity of 20MW in the first half of the year, but a year-on-year increase of 56%. The company's photovoltaic power stations are mainly located in Inner Mongolia (270MW) and Qinghai (200MW) as well as other northwest regions. The continuous increase in installed capacity has also led to a rapid increase in the company's power generation, with the company completing 60844MWh in the first half of the year, an increase of 51.8 per cent over the same period last year. Considering that the Shanxi Datong project will be connected to the grid at the end of June, the company's total annual power generation is expected to be about 1500GWh, an increase of nearly 90 per cent year-on-year. From a regional point of view, the electricity generation of Inner Mongolia and Qinghai accounted for 44% and 25% of the company's total electricity generation in the first half of the year, which is the main source of electricity contribution, but with the balanced development of power plants in the provinces in the later stage, the company's power generation business is expected to be more balanced.

Our point of view: United Photovoltaic (686.HK) is a listed platform for clean energy operations under China Merchants, a large central enterprise. The company relies on strong shareholder support, using flexible and diversified financing methods, through mergers and acquisitions and other ways to rapidly increase the installed capacity of photovoltaic, and the power consumption of the Internet is also growing rapidly. It is expected that the company's installed capacity and online electricity will continue to grow rapidly in the future, while increasing efforts to build self-built power stations. According to the unanimous expectation of Wind, the company's forecast EPS for 2016 and 2017 is 0.05,0.07 yuan, corresponding to the current stock price of HK $0.70, Pmax E is 14,10 times, while the static Pmax E is 7 times, and the company's valuation is not high, so investors are advised to pay close attention.

Risk tips: power plant project acquisition risk, power plant operation risk.