Net profit increased 52.2% year-on-year to RMB 109 million in 2019. Revenue for the period fell 13.0% year over year, while net profit increased 52.2%. Revenue and earnings for the period were better than expected. Revenue from thermal power equipment and power plant engineering services, which accounted for more than 60% of total revenue, decreased by 29.7% and 26.4%, respectively. The consolidated gross margin increased 2.4 percentage points to 14.9% year-on-year during the period, mainly because several business segments achieved a recovery in gross margin. New orders during the period reached RMB 30.19 billion, a year-on-year decrease of 10.5%. New overseas orders contributed RMB 12.652 billion during the period, a year-on-year decrease of 11.8%.

Investment in power projects in the first two months of 2020 reached RMB 21.7 billion, a year-on-year decrease of 10.7%. In the first two months of 2020, investment in thermal power, hydropower, and nuclear power fell 22.7%, 40.9%, and 39.6%, respectively, while investment in wind power during the period soared 142.4% year on year. Notably, investment in wind power projects increased 82.4% to RMB 117.1 billion in 2019. As the domestic wind power rush continues in 2020, we expect domestic wind power project investment in 2020 to break the 100 billion yuan mark again, and the new installed capacity of wind power will reach at least 30 gigawatts within the year.

We maintain our “collected” investment rating of the company and the target price of HK$2.70. Given that the company's gross margin is recovering and revenue is expected to regress, our adjusted earnings per share forecast for 2020 to 2022 is RMB 0.191/RMB 0.266/RMB 0.343, respectively. Our target price is equivalent to 12.6 times/9.0 times/7.0 times the price-earnings ratio of 2020 to 2022 or 0.3 times/0.2 times/0.2 times the net price-earnings ratio of 2020 to 2022.