Earnings may fall 90.00~63.33% YoY

Hiconics Eco-energy Technology preannounced its 1Q17eearnings: net profit attributable to shareholders may fall90.00~63.33% YoY to Rmb6~22mn. Its earnings may sharplyfall YoY, which is in line with expectation as: 1） the companyrecorded ~Rmb43mn of investment income （selling back a stakein Guodian Nanjing Automation） in 1Q16, creating a high base.2） AFV output & sales volume in 1Q17 was relatively low due tofalling subsidies and revisions to the list ofgovernment-subsidized AFV models. As a result, the company’spowertrain sales were relatively low.

Trends to watch

Sales of AFV powertrains and EV chargers may maintainhigh growth.

Stable progress in EV leasing and charging business.

Energy saving & environmental protection business maybecome a stable source of profit.

Valuation and recommendation

Maintain earnings forecasts. The stock is trading at 29x2017e P/E and 23x 2018e P/E. Maintain BUY and TP ofRmb10.50, implying 35x 2017e P/E and 28x 2018e P/E.

Risks

AFV sales disappoint; slow progress in vehicle leasing business;GM of VFDs falls.