Interim net profit was 410 million yuan, up 18.8% from the same period last year: the company's mid-term income in 2019 was 3.173 billion, up 17.3% from the same period last year; interim net profit was 410 million, up 18.8% from the same period last year; and diluted earnings per share was 2.15%, up 19.1% from the same period last year. Medium-term net profit growth was mainly due to a 22% year-on-year increase in photovoltaic power generation to 4.577 billion hours.

The average grid-connected electricity price in the first half of the year is 0.74 yuan per kilowatt-hour, with a gross profit margin of 67.5%: by the middle and end of 2019, the total installed capacity of the company's grid-connected photovoltaic power station is 7.182GW. The average electricity price (excluding tax) in the first half of the year was about 0.74 yuan per kilowatt-hour, down 2 cents from the same period last year, mainly due to the reduction of domestic feed-in electricity price and the competitive bidding price adopted by companies on some projects. The gross profit margin in the first half of the year fell 1.2 percentage points to 67.5% compared with the same period last year, mainly due to the reduction of electricity prices for grid-connected projects by the government.

By the end of mid-2019, the company's electricity price receivables (government subsidies), including the first seven batches, poverty alleviation and the eighth batch to be applied, totaled 8.811 billion yuan, an increase of 2.031 billion yuan over the end of last year.

The strategic transformation in the first half of the year has achieved initial results: in the first half of 2019, the company actively cooperated with large domestic central and local state-owned enterprises at the listed company level and project level to introduce capital and optimize the ownership structure. 3800.hk, the parent company, announced in June that it planned to transfer 51 per cent of the company's total share capital to Huaneng Group. At the project level, in the first half of March, the company sold part of its stake in the 280MW project to China Power International Development Co., Ltd.; in May, the company announced plans to sell part of its stake in the 977MW project to Shanghai Rongyao New Energy, and completed the transfer of the project to Zhongguang Nuclear Solar Energy and three Gorges New Energy in the first half of the year. The cash recovery of the four transactions is expected to be about 2.95 billion. Together with the termination and consolidation of the related debt, the size of the company's debt will be reduced by about 9.23 billion.

Maintain target price HK$0.33 and "neutral" rating

The company is the largest operator of private photovoltaic power stations in China, suffering from serious arrears of photovoltaic subsidies, higher capital costs than state-owned enterprises, short-term debt pressure and other factors, reducing liabilities and light assets become the primary goal of the company. At present, the equity transaction between the parent company and Huaneng Group is still in progress and needs to be announced.

Maintain the company's forecast of income and net profit from 2019 to 2020, and increase the forecast of income and net profit by 2021 to 64.92 and 816 million yuan respectively. Maintain the target price of HK $0.33 and "neutral" rating. The current valuation corresponds to 7.5 x 2019 Pswap E.

Risk hint: the recovery of subsidies is not as expected; the reduction of liabilities is not as expected.