1Q17 results in line with expectation

Elion Energy announced 1Q17 results: Revenue wasRmb2.744bn, up 38% YoY; net profit attributable toshareholders was Rmb75.13mn, up 178% YoY, or Rmb0.03 pershare, mainly driven by YoY growth in product prices. 。

Trends to watch

YoY growth in prices of coal and chlor-alkali productsboosted earnings.

Renewable energy business to boost long-termgrowth outlook.

Controlling shareholder continued buying shares inthe firm, demonstrating its confidence in ElionEnergy.

Earnings forecast

Hike in prices of coal-to-chemical products will likely enhanceearnings, and the renewable energy business is progressingsmoothly. We maintain our earnings forecast forFY2017/2018.

Valuation and recommendation

The stock is trading at 43x/30x 2017e/2018e P/E. We maintainour BUY rating and Rmb8.50 target price based on 46x/32x2017e/2018e P/E.

Risks

Volatile product prices; renewable energy business disappoints.