Datang New Energy's net profit attributable to parent owners fell 9.0 per cent year-on-year to 480 million yuan in the first quarter of 2020, in line with expectations. Net income per share accounts for 46.8% of our current full-year forecast. The year-on-year decline in net profit was mainly due to relatively weak income growth and higher effective tax rates. The increase in depreciation and amortization expenses, maintenance costs and staff costs was basically in line with the growth rate of installed equipment, while other operating expenses increased significantly due to the provision for impairment. We believe that the company's performance in the first quarter of 2020 is unsatisfactory or partly affected by the outbreak of COVID-19, and is expected to pick up as the incremental effect of new installations appears. However, taking into account the growth on the cost side and the further decline in the company's profitability, we expect Datang New Energy's full-year earnings per share in 2020 to record a modest year-on-year growth of only about 5.0%.

Maintain Datang New Energy "Collection" investment rating but lower the target price to HK $0.85. We have lowered our earnings per share forecast for Datang New Energy 2020Compact 2021 / 2022 to RMB 0.122 / 0.149 / 0.203 respectively. Looking forward to the follow-up, the company's major operating expenses are expected to increase with the expansion of installed capacity, but the overall will still be within a controllable range. As the progress of some projects under construction is affected by COVID-19 's epidemic, the company may need to continue to make provision for impairment, but its scale should not increase significantly compared with 2019. The company's recovery of renewable energy subsidies in 2020 is expected to be similar to that in 2019, while the decline in financing costs may maintain the net financial expenses at a reasonable level. The company's valuation is still historically low and we maintain its "collection" rating. The current target price is equivalent to 6.3 times / 5.2 times / 3.8 times 2020 / 2021 / 2022.