1——3Q16 earnings +30——60% YoY

East Power preannounced its 1——3Q16 earnings: net profitattributable to shareholders will grow 30——60% YoY toRmb244mn——300mn, in line with expectations. The company alsoannounced: 1） it has acquired a 70% stake in a photovoltaic （PV）power generation company in Shuyang County usingRmb55.44mn of its own funds; 2） it established a JV withGuangdong Sunsign Electrical Technology Development; itcontributed Rmb15.30mn for a 51% stake; and, 3） it investedanother Rmb95mn into its wholly-owned subsidiary focusing onnew energy technologies

Trends to watch

Rapid earnings growth. Over 1——3Q16, the company'searnings will deliver rapid growth thanks to: 1） stablegrowth in high-end power supply & data center businesses;2） high growth in PV system integration business; and, 3）decent growth in revenue from its own PV power plants.

Share purchases + increasing investment insubsidiary to strengthen presence in PV businessand expansion into energy storage.

Stable growth in high-end power supply business;charging pile business gaining momentum.

Valuation and recommendation

Maintain earnings forecasts: over 2016/17e, its operatingrevenue will likely reach Rmb6.03bn/7.78bn, net profitattributable to shareholders should hit Rmb380mn/530mn givingfully diluted EPS of Rmb0.66/0.91. The stock is trading at41x/30x 2016/17e P/E. Maintain BUY rating and TP ofRmb35.53, implying 31.89% upside potential.

Risks

Rapid decline of charging pile prices; power curtailment anddelayed subsidies in PV sector.