2016 earnings to grow 40~70% YoY

The company expects its earnings to grow 40~70% YoY toRmb391~474mn for 2016. Non-recurring item is estimated atRmb110mn (mainly including investment income from disposalof equity stake in Jiangnan Jicheng). The earnings guidance is inline. Meanwhile, East Power proposes cash dividend of Rmb0.9and bonus share of 30 shares per 10 shares for 2016. Inaddition, East Power plans to issue fixed-rate corporate bonds ofup to Rmb1.2bn with a term of no longer than five years in orderto supplement working capital and repay bank loans.

Trends to watch

Rapid earnings growth helped by the PV powerbusiness;

Earnings from EV charging business have significantupside in 2017;

High stock dividend likely to offer short-term tradingopportunity.

Valuation and recommendation

We keep EPS forecasts unchanged at Rmb0.71 for 2016 andRmb0.89 for 2017. The stock now trades at 37x/30x2016e/2017e P/E. Maintain BUY with TP of Rmb35.53based on 50x/40x 2016e/2017e P/E, implying an upside potentialof 35.10% from the current share price.

Risks

The PV power curtailments and a decline in subsidy; delayedannouncement of new subsidy policy for AFV.