Results met the expectation

The annual revenue of company in 2014 reported RMB 5.149 billion Yuan, up 10.5%; the gross profit was RMB 1.296 billion Yuan and the gross margin was 25.1% which declined by 6 ppts from a year earlier. The profit belonging to the company shareholder was 335 million Yuan, down 27.1% yoy, and the earning per share was RMB 0.09 Yuan. The company results were basically in line with the expectation.

Natural gas business remained stable

The sales revenue of natural gas in 2014 was RMB 3.903 billion Yuan, up 17.3 % yoy; the gross margin was 16.5%, down by 3.3 ppts yoy , which was mainly because of the gas price rising. The wholesale gas volume was up 10.8% yoy while the retail gas volume dropped by 7.5%. There will be more newly-built pipelines putting into gas transportation in the future and the wholesale gas volume may increase further, however, the retail gas volume may decrease because of the weaker economy this year. We think that the profits of natural gas business will basically maintain present level in the next two years.

Wind power business is worth expecting

The income of wind power business of the company in 2014 was RMB 1.246 billion Yuan, which was down 6.6% yoy; the main reason of the decline was the poor condition of wind resources in 2014. Holding installed capacity has reached 1696.8 trillion watts, which has added by 251.5 trillion watts. There are 548.5 trillion watts of projects under construction, which are estimated to be completed in succession in the second half of 2015. The annual utilization hours of 2014 were 1996, decreasing by 316 hours compared to that of 2013. Considering the situation of wind power in the first quarter of 2015, the utilization hours of this year will rise; and wind power business will be the major driving force of result growth.

Valuation

Though the result of the company in 2014 was not good, the time-racing installation of wind power guarantees result growth in the next two years. Under the ideal external conditions that wind resources have been improved and that the rate of abandoned wind has declined, the result of the company will be significantly improved. We have raised the target price of the coming 12 months to 2.82 HKD, which is equal to 20 times of expected earnings in 2015, "buy" rating. (Closing price as at 14 April 2015)

Financials

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