Talk on Potential Takeover Still Ongoing, Reiterate "Buy" 潜在收购的商谈仍在继续，重申“买入”

股

票

研 [Table_Title] Company Report: GCL New Energy (00451 HK) Jun Zhu 朱俊杰

究 (852) 2509 7592 EquityResearch 公司报告：协鑫新能源 (00451 HK) [email protected]

16 August 2019 [Table_Summary] Talk on Potential Takeover Still Ongoing, Reiterate "Buy" 潜在收购的商谈仍在继续，重申“买入”

 Earnings in 1H2019 went up YoY by 18.8% to RMB410 mn, missing our [Table_Rank] 公 expectation. Revenues in 1H2019 beat but earnings were below expectation Rating: Buy Maintained mainly due to the sharp rise in finance costs and administrative expenses 司 during the reporting period. Gross margin in 1H2019 was down 1.2 ppts YoY 报评级：买入 (维持) to 67.5%. By the end of June 2019, total installed solar capacity and grid 告 connected solar capacity reached 7,182 MW and 7,038 MW, respectively.

Sales volume of solar electricity in 1H2019 reached 4,577 mn kWh, up YoY by 6[Table_Price-18m TP 目标价] : HK$0.40 CompanyReport 22%. Average solar tariff in 1H2019 was RMB 0.75/kWh, down YoY by Revised from 原目标价: HK$0.45

approximately 3%. Share price 股价: HK$0.270

 The potential takeover by China Huaneng Group is highly likely to take

place in 2H2019. We believe that the probability of the transaction is quite high as GCL Poly needs to deleverage itself to fend against negative impact Stock performance brought by rapidly falling solar material prices in 2019. We think the disposal 股价表现 is in the interest of GCL Group and of its shareholders. High gearing and high [Table_QuotePic] 50.0 % of return cost of debt are the key causes of low profitability of GNE, but we believe

things are about to change with Huaneng on board. 40.0

证  Earnings estimates trimmed under new assumptions. Under a series of 30.0

券告 new assumptions, our revised EPS forecasts from 2019 to 2021 are RMB 20.0 0.041/ RMB 0.050/ RMB 0.052, respectively.

研报 10.0

 We trim our TP to HK$0.40 but reiterate the "Buy" investment rating.

究究 0.0

Our new TP corresponds to 8.5x/ 7.0x/ 6.8x FY19 to FY21 PER or 1.0x/ 0.9x/ 报

研 0.7x FY19 to FY21 PBR. (10.0)

告  2019 上半年的净利润同比升 18.8%至人民币 410 百万元，差于我们的预期。期内的收入 (20.0)

券 Aug-18 Nov-18 Feb-19 May-19 Aug-19

EquityResearch Report 好于预期但净利差于预期，主要是因为期内急剧攀升的融资成本以及行政支出。期内毛利 HSI GCL-New Energy 证率同比回落 1.2 个百分点至 67.5%。截至 2019 年 6 月末，太阳能总装机及并网装机容量

分别为 7,182 兆瓦以及 7,038 兆瓦。期内的太阳能总售电量为 45.77 亿千瓦时，同比升 22%。 [Tab

期内的平均太阳能上网电价为人民币 0.75 元每千瓦时，同比跌约 3%。

Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y

清 le_I

洁  中国华能集团的潜在收购很有可能将于 2019 下半年内发生。我们相信该潜在交易发生的股价变动 1 个月 3 个月 1 年 Solar Abs. % nfo1 - 概率相当之高，主要因为保利协鑫急需降杠杆以应对 2019 年光伏材料价格急跌所带来的

(16.9) 1.9 (8.5) 能绝对变动 % 负面冲击。我们认为潜在的交易对于协鑫集团以及其股东们都是极有利的。高杠杆以及高源] Rel. % to HS Index (6.2) 11.7 (1.8) 借贷成本一直都是导致协鑫新能源盈利能力低走的核心原因，但我们相信在华能入主之后，相对恒指变动 % 行一切都将被改变。 Avg. Share price(HK$) 0.30 0.29 0.30 业平均股价（港元） -  我们在新的假设下调低了对公司的盈利预测。在一系列新假设的应用下，我们经调整后的 Source: Bloomberg, Guotai Junan International. 太 2019 至 2021 年的每股盈利预测分别为人民币 0.041 / 0.050 / 0.052 元。阳  我们下调目标价至 0.40 港元但重申“买入”的投资评级。我们的新目标价相当于 8.5 倍 / 能

CleanSector Energy 7.0 倍 / 6.8 倍 2019 至 2021 年市盈率或 1.0 倍 / 0.9 倍 / 0.7 倍 2019 至 2021 年市净率。

Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE [Tab 年结Profit ] 收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 le_I 12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%)

2017A 3,942 841 0.044 528.6 5.1 0.295 0.8 0.0 0.0 16.5 nfo2 2018A 5,632 470 0.025 (43.2) 9.5 0.322 0.7 0.0 0.0 8.0

HK)

中] 2019F 5,152 788 0.041 64.0 5.8 0.358 0.7 0.0 0.0 12.2

协 451 外 2020F 5,188 958 0.050 22.0 4.8 0.413 0.6 0.0 0.0 13.0 鑫 (00 2021F 5,261 987 0.052 4.0 4.6 0.472 0.5 0.0 0.0 11.7 运新 [Table_BaseData]Shares in issue (m) 总股数 (m) 19,073.7 Major shareholder 大股东 GCL Poly Energy 62.3% 能输 Market cap. (HK$ m) 市值 (HK$ m) 5,149.9 Free float (%) 自由流通比率 (%) 27.7 源 3 month average vol. 3 个月平均成交股数 (‘000) 11,162.0 FY19 Net gearing (%) FY19 净负债/股东资金 (%) 376.9 52 Weeks high/low (HK$) 52 周高/低 (HK$) 0.420 / 0.241 FY19 EV /EBITDA (x) FY19 企业值/EBITDA (x) 7.7

Source: the Company, Guotai Junan International. GCL New Energy New GCL

See the last page for disclaimer Page 1 of 7

[Table_PageHeader]GCL New Energy (00451 HK)

Earnings in 1H2019 went up YoY by 18.8% to RMB410 mn, missing our expectation. GCL New Energy’s (the "Company")

revenues in 1H2019 beat but earnings were below expectation, mainly due to the sharp rise] in1 financer a M costst h g andi administrativeR _ e l b a T [

expenses during the period. Gross margin in 1H2019 was down 1.2 ppts YoY to 67.5%. At the end of the reporting period, total

installed solar capacity and grid connected solar capacity of the Company reached 7,182 MW and 7,038 MW, respectively. 9

Sales volume of solar electricity in 1H2019 reached 4,577 mn kWh, up YoY by 22%. Average solar tariff in 1H2019 was RMB 201 0.75/kWh, down by approximately 3% YoY from RMB 0.77/kWh for the same period of 2018. The decrease in average tariff

was due to on-grid solar tariff cuts for new projects connected to the grid in 2H2018, as well as the competitive bidding tariff on August

certain new projects. The Company disposed of approximately 1.6GW of solar assets over the last 10-month period in 4 16 separate transactions, in which 3 of them have already been completed with 1 pending for completion in 2H2019 (i.e. the deal with Shanghai Rongyao New Energy). Upon completion of the transaction, total installed solar capacity of GNE will be reduced by 977 MW. According to the Company, the 4 transactions will, in aggregate, reduce approximately RMB9.23 bn in existing borrowings and will bring in approximately RMB2.95 bn cash to further repay debt. We believe the transactions are in the interests of the Company as well as its shareholder as they are part of the deleveraging strategy of the Company. Taken away more than RMB10 bn in debt would mean finance cost savings of no less than RMB600 mn per year moving forward. To improve profitability, we expect GNE to continue to refinance its debt to lower its borrowing costs and to dispose of its solar assets (either majority or minority stake) to further deleverage itself should the ongoing talks with China Huaneng Group fail to happen (i.e. the potential takeover by Huaneng).

] 2 r a M t h g i R _ e l b a T [

Table-1: 1H2019 Operating Results and YoY Comparison

(RMB mn) 1H2019 1H2018 YoY ∆ Comments Sales volume of the solar electricity in 1H2019 reached 4,577 mn kWh, Revenues 3,173 2,704 +17.3% up YoY by 22% COGS (1,032) (847) +21.8% Gross profit 2,141 1,857 +15.3% Gross margin was down by 1.2 ppt YoY Admin expense (374) (257) +45.8% A result of the rapid expansion Other income 150 126 +18.7% EBIT (Operating income) 1,917 1,727 +11.0%

Non-operating income / (loss) 140 (163) -185.5% (00451 HK) Share from affiliate & JV 1 8 -91.7% Finance cost (1,419) (1,062) +33.5% Both the scale of debt and interest rate went up in 1H2019 Profit before tax 638 509 +25.4%

Tax expense (67) (21) +225.5% 协鑫新能源 Minority interest (161) (143) +12.3% Net income 410 345 +18.8% Basic EPS (RMB) 0.0215 0.0181 +18.8%

Margins (YoY comparison) YoY ppt ∆ GCL New Energy Gross margin 67.5% 68.7% -1.2 ppt Average solar tariff went down in 1H2019 EBIT margin 60.4% 63.9% -3.5 ppt PBT margin 20.1% 18.8% +1.3 ppt Net margin 12.9% 12.8% +0.1 ppt Source: the Company, Guotai Junan International.

The potential takeover by China Huaneng Group is highly likely to take place in 2H2019. GCL Poly Energy, the parent of the Company, and GCL New Energy (GNE) jointly announced in early June 2019 that a wholly owned subsidiary of GCL Poly had entered into a cooperation intent agreement with China Huaneng Group, one of the largest energy conglomerates in China, in relation to the possible sale of 9.73 billion ordinary shares of GNE, representing approximately 51.0% of the entire issued share capital of GNE. The cooperation intent agreement is non-legally binding and no terms of possible transaction have been agreed among the parties at the date of the joint announcement. The completion of the possible transaction will lead to change in the control of GNE, and GCL Poly’s holding in GNE will decrease from 62.3% to 11.3%. GCL Poly may exit all its

shareholdings in GNE if a good deal were to be reached, in our opinion. Over the last 10 months, GNE sold approximately 1.6

GW of solar assets in 4 separate transactions. Should the remaining solar assets be valued at RMB7.0 per watt (the selling Report price per watt of the 4 transactions that took place over last 10 months averaged at RMB7.8 per watt), we estimate the total enterprise value of GNE (with the estimated sellable assets in the total installed capacity of approximately 6.2 GW) would reach

approximately RMB43.4 bn. Taking out the estimated net debt of RMB30 bn and the minority interest of RMB3.6 bn, we Company estimate the equity portion of GNE to be valued at approximately RMB9.8 bn, implying that the market capitalization of GNE should reach around HK$11.1 bn or at a share price of approximately HK$0.58 apiece. The latest closing price of GNE was See the last page for disclaimer Page 2 of 7 [Table_PageHeader]GCL New Energy (00451 HK)

HK$0.270, implying upside potential of 115%. We believe the possibility of the potential transaction is quite high as GCL Poly

needs to deleverage itself to fend against negative impact brought by rapidly falling solar ] material1 r a pricesM t inh 2019g i . R We_ thinke l theb a T [

disposal is in the interest of GCL Group and of its shareholders. We believe that the completion of the transaction will lead to

improvement in the management and corporate governance of GNE, and potential deleveraging and refinancing activities to be 9

taken by China Huaneng Group after taking over GNE will substantially improve the profitability of GNE. We are quite positive 201 about this potential transaction and are optimistic that it will be implemented successfully this time around (unlike the Taiping

deal that has been hanging in the air for years, which we believe is already dead). High gearing and high cost of debt are the August

key causes of low profitability of GNE, but, having Huaneng Group as its majority shareholder, things are set to change. 16

We estimate newly installed solar capacity in China in 2019 to be approximately 40GW. The National Energy Administration (NEA) and the National Development and Reform Commission (NDRC) released the list of first batch of wind and solar power generation grid parity projects in May 2019, covering 250 projects across 16 provinces and regions with total installed power capacity of 20.76 GW; including 4.51 GW of wind power projects, 14.78 GW of solar projects, and 1.47 GW of distributed energy pilot projects. The 20.76 GW of wind power and solar power grid-parity projects stated in the announcement are expected to be commissioned between 2019 and 2021, with most of the projects to be commissioned after 2019. According to the notice, about 4.73 GW of solar grid parity projects are scheduled to be commissioned in 2019. Furthermore, the NEA issued a notice regarding the bidding result of 2019 solar projects with state subsidies in mid-July 2019, and it proposed to include 3,921 solar projects across 22 regions in China into the 2019 national subsidy list. Total installed capacity to be included

] 2 r a M t h g i R _ e l b a T [ amounted to 22.7886 GW. In which, 366 are concentrated solar farms with an aggregate installed capacity of 18.123 GW, and 3,555 are industrial and commercial distributed solar projects with a total installed capacity of 4.6653 GW. Each solar project to be built and connected to the grid in accordance with state requirement will enter the national subsidy list and will be entitled to state subsidies. All the 3,921 solar projects (i.e. 22.7886 GW) mentioned in the July notice are scheduled to be commissioned in 2019. Given that newly installed solar capacity in China reached 11.65 GW (down 55% YoY) in 1H2019 according to statistics from CEC, if all 22.79 GW involved in this notice were to be completed by the end of the year, domestic newly installed solar capacity is set to exceed 30 GW. Therefore, we estimate newly installed solar capacity in China this year to be between 35 GW and 45 GW (with a midpoint of 40 GW), which is roughly 15 GW higher than our prior forecasted range before the

announcement of the July notice. Domestic new solar installations in 2018 was 44.3 GW, and we believe that, under the best (00451 HK)

case scenario, newly installed domestic solar capacity in 2019 will stay flat as compared to that in 2018. Moreover, as we estimate newly installed solar capacity in overseas markets to reach between 75 GW and 85 GW this year (+29.3% to +46.6% YoY), global solar installations in 2019 is expected to achieve new solar installations in the range of between 110 GW and 130

GW, implying YoY global solar installation growth of between 7.8% and 27.5% from 102 GW installed in 2018. As demand in 协鑫新能源 the domestic market becomes certain, the global solar market is set to experience moderate growth in 2019.

We have trimmed our earnings forecasts from 2019 to 2021 with the new assumptions applied. As the potential transaction with China Huaneng Group may or may not happen in 2019, we have not factored in the takeover in the forecast

model. However, as GNE is yet to conclude the transaction of the 977 MW of solar asset disposal in 2H2019, the total installed GCL New Energy solar capacity in 2019 and onwards is set to decline, especially as we don’t expect large scale new investments to be made by the Company. Key new assumptions in our revised model include: 1) total installed solar capacity from 2019 to 2021 to be 6.1GW/ 6.2GW/ 6.3GW, respectively; 2) average utilization hours from 2019 to 2021 to be 1,193/ 1,205/ 1,209, respectively; 3) average solar tariff per kWh from 2019 to 2021 to be RMB0.748/ RMB0.738/ RMB0.736, respectively; 4) average interest rate not exceeding 6.1% per annum over the 3-year forecast period; 5) approximately RMB10 bn in debt to be reduced in 2019 with the conclusion of the four solar asset disposal transactions (with an aggregate of 1.6 GW in solar assets sold); and 6) no large scale investment will be carried out as the management’s priority in 2019 is on assets disposal and deleveraging. Our revised EPS forecasts from 2019 to 2021 are thus RMB0.041/ RMB0.050/ RMB0.052, respectively.

We have trimmed the TP to HK$0.40 but maintain the "Buy" rating. We expect the potential deal with China Huaneng Group to be concluded within 2019 as GCL Poly Energy, the parent of GNE, is in desperate need to lower its gearing to offset the negative impact brought by plunging solar materials price. We are positive about this potential transaction and believe that the likelihood of its success is very high given China Huaneng Group wants to acquire a large scale of high quality renewable

energy assets and GCL Group needs to deleverage itself. Should a deal be signed this year, we expect the share price of GNE Report to rise considerably (our calculated equity price per share of GNE is approximately HK$0.58 apiece) and that GNE will gradually lower its gearing and optimize its existing debt structure to improve the Company’s overall profitability. All in all, we

are optimistic about the outlook of GNE and believe the current valuation is quite attractive for investors. The assets of GNE are Company of good quality, the only problems are the high gearing and the capital structure. We maintain the "Buy" rating but trim our TP to HK$0.40. Our new TP corresponds to 8.5x/ 7.0x/ 6.8x FY19 to FY21 PER or 1.0x/ 0.9x/ 0.7x FY19 to FY21 PBR. See the last page for disclaimer Page 3 of 7 [Table_PageHeader]GCL New Energy (00451 HK)

Figure-1: Historical Cumulative Solar Capacity in PRC Figure-2: Structure of Newly Added Solar Capacity in PRC

] 1 r a M t h g i R _ e l b a T [

300 60 Concentrated Solar Farm Distributed Solar System 53.1

267.6

9 250 50

44.3 201 19.4 200 40 34.5

174.5 August 21.0 4.2

150 30 16 GW GW 130.3

100 20 15.1 77.4 12.9 33.6 10.6 1.4 30.3 0.8 23.3 50 35.8 10 2.1 28.1 3.5 19.4 12.1 13.7 8.6 3.3 6.5 3.5 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2020E 2012 2013 2014 2015 2016 2017 2018

Source: NEA, Guotai Junan International. Source: NEA, Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [

Figure-3: Historical and Forecast Revenue Figure-4: Historical and Projected Installed Solar Capacity

Sales YoY growth % Installed capacity Grid connected capacity 8,000 6,000 5,632 80% 7,309 75% 5,261 6,957 5,152 5,188 70% 7,000 6,189 6,309 5,000 5,990 6,109 6,005 60% 5,815 5,891 6,000 5,503 3,942 50% 4,000 5,000 43% 40%

3,000 30% 4,000 MW

RMB RMB mn 20% 3,000 2,000 10% (00451 HK) 2,000 1% 1% 0% 1,000 -9% -10% 1,000

- -20% - 协鑫新能源 2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Figure-5: Historical and Forecast Utilization Hours Figure-6: Average Solar Tariff Forecast (ex-VAT) GCL New Energy 1,300 0.800 1,283 0.789 1,280 0.790 0.780 1,260 0.770 0.762 1,240 1,228 0.760 0.748 1,220 1,209 0.750

Hour 1,205 0.738 0.736 1,200 1,193 kWh RMB / 0.740 0.730 1,180 0.720 1,160 0.710 1,140 0.700 2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 4 of 7 [Table_PageHeader]GCL New Energy (00451 HK)

Figure-7: Forward PER of GCL New Energy Figure-8: Forward PBR of GCL New Energy

] 1 r a M t h g i R _ e l b a T [

Min: 3.7x Historical PER Average PER Min: 0.4x Average: 5.4x Average: 0.7x Historical PER Average PER Max: 9.0x Max: 1.8x 10 2 9

9 201

8 August

6 16 5 1 4 3 2 1 0 0 04-17 08-17 12-17 04-18 08-18 12-18 04-19 08-19 04-17 08-17 12-17 04-18 08-18 12-18 04-19 08-19

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

Table-2: Peers Comparison

] 2 r a M t h g i R _ e l b a T [

Company Stock Code Currency Last price PER PBR ROE (%) EV/EBITDA(x) Market Cap (in local $) 18A 19F 20F 21F 18A 19F 20F 21F 19F 19F HKD mn Poly-silicon & Wafer Comtec Solar Systems Group 00712 HK HKD 0.05 n.a. n.a. n.a. n.a. 1.6 n.a. n.a. n.a. n.a. n.a. 108 Daqo New Energy Corp-Adr DQ US USD 39.66 13.0 11.8 4.6 3.8 1.0 0.9 0.8 0.6 6.9 7.3 4,131 Gcl-Poly Energy Holdings Ltd 03800 HK HKD 0.31 n.a. n.a. 7.9 5.8 0.2 0.2 0.2 0.2 1.1 7.6 6,151 Oci Co Ltd 010060 KS KRW 67,900.00 15.6 n.a. 12.8 8.6 0.5 0.5 0.5 0.4 (1.7) 8.7 10,455

Rec Silicon Asa REC NO NOK 4.34 n.a. n.a. n.a. n.a. 1.2 1.9 0.8 1.8 (73.3) 72.3 1,062

TBEA Co Ltd 600089 CH CNY 6.56 13.4 10.8 9.2 8.6 0.8 0.7 0.7 0.7 6.9 7.4 27,187 Wacker Chemie Ag WCH GR EUR 64.52 13.0 19.7 14.5 11.9 1.0 1.0 1.0 1.0 4.8 5.0 29,430 Xinte Energy 1799 HK HKD 5.10 4.1 n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a. n.a. 5,330 Xian Longi Silicon Materia-A 601012 CH CNY 24.99 33.2 21.5 16.9 13.6 5.2 3.9 3.3 2.7 18.9 15.2 101,043

(00451 HK)

Simple Average 15.4 15.9 11.0 8.7 1.3 1.3 1.0 1.1 (5.2) 17.6 Weighted Average 24.5 19.1 14.5 11.7 3.2 2.6 2.2 1.8 12.1 11.9

Cell & Module 协鑫新能源 Canadian Solar Inc CSIQ US USD 20.60 5.1 8.9 7.4 8.3 1.0 0.9 0.8 0.7 10.8 6.4 9,602 Jinkosolar Holding Co-Adr JKS US USD 18.05 11.3 8.1 7.2 8.4 0.6 0.5 0.5 0.4 7.5 7.0 6,144 Renesola Ltd-Adr SOL US USD 0.96 207.1 12.0 8.0 n.a. 4.0 n.a. n.a. n.a. 1.9 n.a. 286 Simple Average 74.5 9.7 7.5 8.4 1.9 0.7 0.6 0.6 6.7 6.7 Weighted Average 11.1 8.7 7.3 8.4 0.9 0.8 0.7 0.6 9.4 6.6

GCL New Energy Solar System Operator

Gcl New Energy Holdings Ltd 00451 HK HKD 0.27 9.3 6.0 6.3 6.0 0.6 0.6 0.5 0.5 10.1 7.4 5,150 Jiangsu Akcome Science & T-A 002610 CH CNY 1.58 56.4 n.a. n.a. n.a. 1.2 n.a. n.a. n.a. n.a. n.a. 7,914 Kong Sun Holdings 00295 HK HKD 0.11 91.9 n.a. n.a. n.a. 0.2 n.a. n.a. n.a. n.a. n.a. 1,631 Shunfeng International Clean 01165 HK HKD 0.20 n.a. n.a. n.a. n.a. 0.4 n.a. n.a. n.a. n.a. n.a. 996 Panda Green Energy 00686 HK HKD 0.26 n.a. n.a. n.a. n.a. 0.4 n.a. n.a. n.a. n.a. n.a. 3,889 Xinyi Energy Holdings 03868 HK HKD 2.14 n.a. 15.3 13.8 12.6 n.a. 1.4 1.5 1.5 10.3 10.9 14,450 Simple Average 52.5 10.6 10.0 9.3 0.6 1.0 1.0 1.0 10.2 9.1 Weighted Average 43.8 12.8 11.8 10.9 0.8 1.2 1.2 1.2 10.2 10.0

Clean Energy IPP Operator

China Datang Corp Renewabl-H 1798 HK HKD 0.76 4.3 3.5 3.0 2.8 0.5 0.4 0.3 0.3 11.3 7.7 5,528 China Longyuan Power Group-H 916 HK HKD 0.91 5.6 4.5 4.4 4.0 0.6 0.5 0.5 0.4 11.8 2.9 3,905 Cgn New Energy Holdings Co L 1811 HK HKD 2.04 9.0 8.9 8.1 7.7 1.1 1.1 1.0 0.9 12.5 11.0 92,715 Cgn Power Co Ltd-H 1816 HK HKD 1.27 4.0 4.2 3.8 3.7 0.4 0.4 0.4 0.4 9.9 5.6 10,471 Beijing Jingneng Clean Ene-H 579 HK HKD 1.31 4.7 3.7 3.2 3.1 0.5 0.4 0.3 0.3 10.2 7.9 11,014

Huadian Fuxin Energy Corp -H 816 HK HKD 4.33 7.5 6.6 5.9 5.4 0.7 0.6 0.6 0.5 9.5 6.5 34,798

Huaneng Renewables Corp-H 958 HK HKD 1.94 5.6 5.0 4.5 4.2 0.7 0.6 0.5 0.5 12.7 6.4 20,499 Report

Simple Average 5.8 5.2 4.7 4.4 0.6 0.6 0.5 0.5 11.1 6.9 Weighted Average 7.5 7.1 6.5 6.1 0.9 0.8 0.7 0.7 11.6 8.8 Source: Bloomberg, Guotai Junan International . Prices are as of 15th August 2019.

Company

See the last page for disclaimer Page 5 of 7 [Table_PageHeader]GCL New Energy (00451 HK)

Financial Statements and Ratios

[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [ Income Statement Balance Sheet

Year end 31 Dec (RMB) FY17A FY18A FY19F FY20F FY21F Year end 31 Dec (RMB) FY17A FY18A FY19F FY20F FY21F 9

Total Revenue 3,942 5,632 5,152 5,188 5,261 PPE 38,104 42,970 30,104 29,075 28,105 201 COGS (1,289) (1,890) (1,621) (1,648) (1,729) Prepaid expense 113 112 118 124 130

Gross profit 2,653 3,743 3,531 3,540 3,532 Interest in JV 64 103 145 206 295 August

Share based payment expense (34) (13) (39) (29) (27) Amount due to related parties 152 45 47 50 52 16 Admin expense (460) (615) (644) (664) (658) Others 6,280 8,616 9,604 10,801 12,093

Other income 221 272 305 329 356 Total Non-current Assets 44,713 51,847 40,019 40,255 40,676

Other gains / expenses (88) (358) (101) 56 49 Cash & Cash Equivalents 4,197 1,362 2,885 3,113 3,157 Operating Profit 2,292 3,029 3,052 3,233 3,252 Inventories 0 0 0 0 0 Share of JV / affiliate 5 4 6 8 11 Pledged bank deposits 1,728 1,279 1,343 1,411 1,481

Net finance costs (1,432) (2,277) (1,827) (1,772) (1,703) Trade receivable 4,228 4,930 4,637 4,669 4,735

Profit Before Tax 864 756 1,231 1,469 1,560 Others 569 1,761 1,571 1,582 1,605

Income Tax 40 (7) (114) (157) (174) Total Current Assets 10,721 9,333 10,436 10,775 10,977

Profit After Tax 904 749 1,117 1,312 1,386 Total Assets 55,434 61,180 50,455 51,030 51,653

Non-controlling Interest (63) (280) (328) (353) (399) Short-term debts 7,068 8,323 3,565 4,156 4,509

Shareholders' Profit / Loss 841 470 788 958 987 Convertible bonds 926 0 0 0 0

Loans from fellow subsidiary 1,072 1,031 1,631 2,231 2,831

] 2 r a M t h g i R _ e l b a T [ Basic EPS (HK$) 0.044 0.025 0.041 0.050 0.052 Trade payable 10,851 10,134 8,105 8,239 8,646

Others 110 1,087 1,293 1,511 1,746 Total Current Liabilities 20,026 20,575 14,594 16,137 17,731

Long-term debts 25,482 24,340 21,840 19,840 17,840 [Table_CashFlowStatement] Cash Flow Statement Bonds payables 883 3,934 1,434 1,684 1,934

Convertible bonds, LT 0 2,186 1,686 1,186 686

Year end 31 Dec (RMB) FY17A FY18A FY19F FY20F FY21F Others 247 443 342 376 339

Net income 841 470 788 958 987 Total Non-current Liabilities 26,612 30,904 25,303 23,086 20,800

D&A 1,089 1,510 1,353 1,402 1,479 Total Liabilities 46,638 51,478 39,898 39,223 38,531

Change in working capital (1,364) (1,672) (1,488) 158 404 Total Shareholders' Equity 5,621 6,135 6,825 7,882 8,997

Others 1,287 2,155 1,092 1,547 1,769 Minority Interest 3,175 3,566 3,733 3,924 4,125 (00451 HK) Cash from Operating Activities 1,854 2,462 1,744 4,065 4,639 Total Equity 8,796 9,702 10,557 11,806 13,122

Investing activities BPS (HK$) 0.295 0.322 0.358 0.413 0.472

Capital expenditure (13,634) (8,190) (788) (372) (510)

Placement of pledged bank and other [Table_FinancialRatio] Financial Ratios 协鑫新能源

deposits 300 449 (64) (67) (71)

Acquisition (disposal) of subsidiary / JV 11 (17) (42) (61) (89) FY17A FY18A FY19F FY20F FY21F

Others (31) 29 12,332 35 38 Gross margin (%) 67.3% 66.4% 68.5% 68.2% 67.1%

Cash from Investing Activities (13,354) (7,729) 11,438 (466) (631) EBITDA margin (%) 85.8% 80.6% 85.5% 89.3% 89.9%

Financing activities EBIT margin (%) 58.1% 53.8% 59.2% 62.3% 61.8%

Debt raised / (repaid) GCL New Energy 12,814 4,421 (9,508) (909) (1,148) Net margin (%) 21.3% 8.3% 15.3% 18.5% 18.8% Proceeds from deemed disposal of a ROE (%) 16.5% 8.0% 12.2% 13.0% 11.7%

subsidiary (Suzhou GCL New Energy) 1,500 0 0 0 0 ROA (%) 1.7% 0.8% 1.4% 1.9% 1.9%

Proceeds from disposal of subsidiaries 0 116 246 296 355 EV / EBITDA (x) 10.91 9.85 7.73 7.11 6.74

Others (2,426) (2,086) (2,398) (2,758) (3,172) EV / EBIT (x) 16.09 14.77 11.16 10.19 9.80

Cash from Financing Activities 11,888 2,452 (11,660) (3,372) (3,965) Net gearing (%) 517.60 595.92 376.87 309.88 257.19

Net Changes in Cash 388 (2,815) 1,523 228 44 AR turnover (x) 1.1 0.9 0.9 0.9 0.9

Adjustments (18) (20) 0 0 0 AP turnover (x) 8.4 5.4 5.0 5.0 5.0

Cash at Beg of Year 3,826 4,197 1,362 2,885 3,113 Quick ratio (x) 0.5 0.4 0.6 0.6 0.5

Cash at End of Year 4,197 1,362 2,885 3,113 3,157 Current ratio (x) 0.5 0.5 0.7 0.7 0.6

Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 6 of 7 [Table_PageHeader]GCL New Energy (00451 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition 9 Buy Relative Performance>15%; 买入 201 or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%;

or the fundamental outlook of the company or sector is favorable. August

Neutral 中性 Relative Performance is -5% to 5%; 16 or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ]

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),JXR (01951 HK),CHINA MINSHENG BANKING CORP.- H

SHARES (01988 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI (00451 HK)

INVESTMENT (02886 HK),CAM SCSMALLCAP (03157 HK),HAITIANTIAN (08227 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months.

(5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research 协鑫新能源 Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

GCL New Energy DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

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Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 7 of 7