Results in line

1Q16 sales revenue +50.03% YoY to Rmb581mn; net profit +37.71% YoY to Rmn35.35mn, in line.

Trends to watch

PV and charging poles witnessed rapid growth; R&D spending drove up G&A expense. In 1Q16, GuangdongEast Power (GEP) invested in the 173MW distributed PV power station project with its own funds to speed up operationof PV grid connection and operation. The project would likely be completed in 1H16. GEP continued to acceleratecooperation with local governments on charging projects. It also proactively explored PPP model. Full-year rapid growthcan be expected. In 1Q16, G&A expense rose 181% to Rmb61.71mn, mainly due to 1) growing R&D spending after itstrengthened R&D on charging poles, energy storage and large inverters, and 2) >60 subsidiaries established for PVbusiness. We expect G&A expense to fall as the two factors weaken.

Three sectors enjoy significant growth potential in 2016. The AFV industry may experience rapid growth asinvestigation on AFV subsidy fraud comes to an end and new subsidy policy is issued, positive to GEP’s charging polebusiness. Its PV business may grow substantially as the NDRC is to issue permission for distributed PV projects in 1H16.The construction boom of IDC bodes well for GEP’s high-end power facilities business.

Earnings forecast

2016e/17e operating revenue of Rmb6.027bn/7.78bn. Lift 2016e/17e net profit forecast to Rmb383mn/527mn, withdiluted EPS of Rmb0.68/0.94 given the share dividend and upcoming private placement.Valuation and recommendationWe are upbeat on rail transit and data center. We value UPS business at Rmb4.9bn (30x 2016e P/E), PV station businessat Rmb7.1bn (25x 2016e P/E given rapid expansion), and charging pole business at Rmb5.8bn (DCF valuation).Therefore, we value the company at Rmb17.8bn and set TP at Rmb35.53. Maintain BUY.

Risks

Gross margin of charging pole business unlikely to return normal due to lengthy promotion; industrial policy to increasedifficulty in gaining approval for distributed PV projects.