GCL Group chairman to directly steer GCL System IntegrationGCL System Integration （GCL） has announced several adjustments to its managementteam. Most importantly, Zhu Gongshan, chairman of parent GCL Group, is to replaceShu Hua as Chairman, while Mr. Shu continues acting as General Manager and Directorof GCL.

Enhancing value chain synergies

In addition to being China's largest new-energy company, we believe GCL Group is theonly company in the world to own an entire solar supply chain, with listed unitsincluding: 1） upstream: GCL-Poly （3800.HK）， a polysilicon/wafer manufacturer; 2）midstream: GCL System Integration （002506.SZ）， a cell/module manufacturer; and 3）downstream: GCL New Energy （0451.HK）， a solar power plant developer. We think themanagement changes will help GCL Group build synergies along its value chain.

Better execution, as company pursues "two core segments" strategyWe see two other considerations behind the management changes: 1） Disappointingearnings in 2016: GCL realized net profit of just Rmb210m in 9M16, far short of theRmb800m guided for full-year 2016 at the time of its listing （if the target is not met,GCL Group is to make a payment to GCL to compensate for the shortfall）。 2） Improvingexecution of its "two core segments" strategy: GCL pursued its strategy of a dual focuson manufacturing and supply chain finance in 2016, as evidenced by expanding solarcell/module capacity in China and overseas; launching sales of energy storage systems;exploring the electric vehicle charging pile market; and exceeding Rmb1bn intransaction volume at its supply chain financing arm. However, the new businesseshave not started generating meaningful earnings. GCL's strategic execution is likely toimprove following the management team changes, in our view.

Valuation: Maintain Buy

While we believe the management changes bode well for the company's long-termdevelopment, we are cutting our 2016-18E module shipments, given still-strong neartermcompetition in the solar module segment. Accordingly, we are lowering our 2016-18E earnings 7% for each year. Reflecting these changes, we are lowering our DCFbasedPT to Rmb6.9 from Rmb7.5 （WACC 7.8%）。 We maintain our Buy rating.