ORD Daily Insight

Investment Highlight:

    CHINA SINGYES SOLAR TECH (750:HK, Outperform, HK$9.0).

    Analyst: Vincent Yu.

    We expect moderate growth in 1H15E. We expect Singyes to report a net profit ofRmb232m in 1H15E, representing growth of 12% YoY and basic EPS of Rmb0.33.

    EPC guidance. At end-June, the company announced an additional 470MW projectpermits distributed across a number of regions, including Guangdong and Yunnan insouthern China, Hubei and Hebei in central China and Xinjiang and Shaanxi in westernChina. The company expects the projects to result in c.350MW of engineering,procurement and construction (EPC) orders. This compares with full-year EPC ordersguidance of 600MW for 2015. With c.200MW completed in 1H15E and 350MW solarEPC orders likely to be completed in 2H15E, we see a strong likelihood that the companywill achieve this year’s target. Given strong momentum of solar installations driven bythe government’s 17.8GW national target this year, we see high demand for solar EPCservices as supporting the company win extra orders this year, despite falling short ofits 500MW target in 2014A with 480MW completed. Nevertheless, we see the 30%-plusgross margin guidance for EPC this year as hard to achieve, as 1H15 EPC orders carriedlower margins. Overall, we expect EPC gross margin will remain roughly level with lastyear at 27%.

    Maintain Outperform. We maintain our forecasts of diluted EPS at Rmb1.06 in 15E(+34% YoY), Rmb1.24 in 16E (+17% YoY) and Rmb1.38 in 17E (+11% YoY). We expect themarket to react negatively to the relatively slow rate of growth at 12% YoY expected forinterim result. We lower our target price from HK$12.19 to HK$9.0, representing 6.5x15E PE and 1.3x 15E PB, and 5.6x 16E PE and 1.1x 16E PB. With 19% upside, we maintainour Outperform rating for the company.