Net profit in the first half of 2020 soared by 154.6% to 302 million yuan compared with the same period last year. The profit for the period is in line with its earlier profit forecast and our expectations. Revenue in the domestic market surged 71.1 per cent year-on-year to 4.1 billion yuan, while revenue from wind power equipment rose 38.2 per cent year-on-year to 4.7 billion yuan, mainly driven by the domestic wind power rush. During the period, the composite gross margin rose 2.5 percentage points year-on-year to 21.5%, mainly due to a rebound in the price of wind power products.

We expect domestic investment in wind power to reach an all-time high in 2020. Following an 82.4 per cent increase in wind power investment in 2019, domestic wind power investment in the first seven months of 2020 surged 203.8 per cent year-on-year to 111.2 billion yuan. Affected by the domestic wind power rush, we expect wind power investment to reach an all-time high this year, and we expect no less than 30 gigawatts of new wind power to be installed this year, an increase of no less than 16.7% over the same period last year. However, the wind power investment planning during the 14th five-year Plan period is still relatively unclear.

We maintain our "neutral" investment rating but raise our target price to HK $5.20. We expect the company's revenue to grow by 30.1% /-11.1% /-8.3% respectively year-on-year from 2020 to 2022. In addition, we expect its consolidated gross profit margin to reach 22.0% / 20.5% / 19.6% respectively from 2020 to 2022. Our adjusted earnings per share from 2020 to 2022 are 0.480 yuan, 0.381 yuan and 0.304 yuan respectively. As the company's current valuation is reasonable, we maintain our current investment rating but raise its target price. The new target price of HK $5.20 is equivalent to 10.0x / 12.4x / 15.6x 2020 to 2022 or 0.7x / 0.7x 2020 to 2022.