1H15 earnings slightly missedIn 1H15, EGing’s revenue rose 11.9% YoY to Rmb1.42bn, whileNP fell 67.8% YoY to Rmb33.27mn, slightly missing expectations.In 2Q15, NP fell 69.5% YoY but wasd up 91.2% QoQ.

Modules sales were down 4.1% YoY in 1H15, GM dropped1.97ppt YoY on lower ASP. The sales volume of PV modules in1H15 reached 315MW (excluding the 100MW of self-ownedstations). In 1H15, EGing expanded its capacity, which alongwith the technology upgrades, led to 1,600MW of capacity inmodule packaging.

Revenue from power generation was down 9.17% YoY in 1H15on lower utilization. GM slipped 5.68ppt YoY to 57.19%. The100MW integrated “fishing-PV” project is progressing well andthe company is actively facilitating grid connections. In July,EGing entered into a cooperation agreement with thegovernment of Qitai County to construct 200MW of solar farms.

Trends to watchSmooth progress in the 4’’ sapphire crystal rod project. As of1H15, accumulated investment in this project has reachedRmb140mn. The company plans to invest ~Rmb2.5bn in Xinjiangto expand the economies of scale.

Earnings revisionsTo reflect the decline in module prices, we trim our 2015/16eearnings forecast by 10.0%/6.7% toRmb136mn/265mn.

Valuation and recommendationWe like EGing’s vertically-integrated model and expectthe fishing-PV projects to drive earnings in 2H15.Maintain BUY and cut TP by 10% to Rmb24.85, implying46x 2016e P/E and 0.9x PEG.RisksDecline in module prices beats expectations.