[买入评级]SUNGROW POWER SUPPLY(300274)：RAISE TP TO RMB19; MAINTAIN BUY
We are positive on Sungrow’s leading market share in the invertermarket and its early entry into the distributed power market. Wereiterate our BUY rating, and lift our TP by 19% to Rmb19, implying28x 2018e P/E.
Domestic PV installation to maintain steady growth over 2017–2020. As per the Guidance on the Implementation of the 13th FYP forRenewable Energy, the National Energy Administration expects newPV capacity over 2017–20 at 22.4GW, 21.9GW, 21.1GW and 21.1GW.
Given the rise of distributed PV capacity in 1H17, we expect domesticPV demand to maintain steady growth over the next three years.
Strong 3Q17 earnings. Sungrow preannounced that its 1–3Q17 netprofit will likely rise 135%–155% to Rmb700mn–Rmb760mn, implying3Q17 net profit of Rmb330mn–Rmb390mn （+361%–440% YoY）。 Webelieve the strong 3Q17 earnings were mainly driven by the rise ofdistributed PV installation in China. Sungrow has set up theHousehold PV Business Unit to focus more on the household PVmarket. Its household PV brand, Sunhome, and advanced cloudmonitoring platform, iSolarCloud, could ensure products’ stableperformance and diagnose malfunction in time. Over the long term,Sungrow seeks to expand its market share in the household PVmarket to the same level as in the inverter market. We expect thehousehold PV business to boost its earnings growth going forward.
Grant of restricted shares completed; employees motivated. On May23, Sungrow completed the grant of 3.446mn restricted shares to 497core managers and technicians. We believe it could further motivateemployees.
Earnings forecast and valuation
We lift our 2017/18e earnings forecast by 16.6%/18.3% toRmb845mn/Rmb994mn to reflect the strong 3Q17 earnings growth.
We maintain our BUY rating and raise our TP by 19% to Rmb19,implying 28x 2018e P/E.
Sector demand and inverter prices disappoint.
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