1H15 results in line

1H15 revenue up 19.75% YoY to Rmb656mn, net profit up25.68% YoY to Rmb18.62mn, both in line with our expectations.2Q15 revenue up 8.4% YoY, net profit up 24.7%, in line with thetrend in 1Q15.

In 1H15, sales from UPS batteries surged 72.98% YoY withsteady GM of 21.63%, taking up 55.9% of total mix. By winningbids in major rail transit and data center projects in 1H15, thecompany further expanded its leading advantages.

First half sales from motive batteries up 44.35% YoY toRmb51.55mn with GPM up 2.12ppt to 25.65%. Super motivebatteries, based on graphene technology, have now beensuccessfully applied to Geely EVs. Sacred Sun has also developedhigh-performance forklift batteries meeting DIN & BS standards.

Trends to watch

Adherence to innovation in 1H15. The company developedlong-life tubular colloid OPzV batteries, which mainly targetdistributed energy storage applications in US and EU markets.We expect energy storage batteries to ramp up in 2H15.

Sacred Sun expects 1~3Q15 net profit to rise 10~50% YoY toRmb23.17~31.60mn, implying Rmb4.55~12.98mn earnings and-27~107% growth in 3Q15.

Earnings revisions

Maintain forecast at Rmb43.17mn for 2015 & Rmb86.56mn for2016.

Valuation and recommendation

Leading R&D strength and strong growth outlook. MaintainBUY and TP at Rmb32.71.

Risks

Volatility in prices of raw materials.