Net profit attributable to parent owners of Datang New Energy fell 42.9 per cent year-on-year to 517 million yuan in the first three quarters of 2019, lower than expected. The company's revenue in the first three quarters of 2019 fell 1.5 per cent year-on-year to 5.874 billion yuan, mainly due to a slowdown in the growth of electricity generation and a decline in the average feed-in price. Affected by the increase in depreciation, maintenance, employee compensation and other operating costs, the total cost of sales in the first three quarters increased by 7.8% year-on-year, while the gross profit margin decreased 5.1 percentage points year-on-year to 40.8%. Net financial expenses increased by 3.5% year-on-year due to the increase in the balance of average interest-bearing liabilities. In the third quarter, the company's revenue fell 13.5% from a year earlier and recorded a net loss of 366 million yuan. Based on the company's results for the first three quarters of 2019, we expect its full-year net income per share to decline by about 20.0% and 25.0% year-on-year.

Lower the target price of Datang New Energy to HK $0.95 but maintain its "collection" investment rating. The company's revenue from electricity sales fell year-on-year in the first three quarters of 2019 due to the decline in average wind speed. In addition, the company has once again calculated impairment losses for projects that do not have the conditions for continued development and construction. Financial expenses continue to increase due to the rising leverage ratio and the balance of accounts receivable, and the upward trend of receivables is expected to continue to put pressure on the company's future profitability and cash flow. In view of the continued decline in the company's profitability, we have significantly lowered Datang New Energy's earnings per share forecast for 2019 / 2020 / 2021 to 0.113 yuan / 0.145 yuan / 0.192 yuan respectively. At the same time, we lowered the company's target price from HK $1.20 per share to HK $0.95 per share to reflect changes in earnings per share, but maintained the company's "collection" rating for valuation reasons. The current target price is equivalent to a price-to-earnings ratio of 7.6 / 5.9 / 4.4 / 2019 / 2021.