NARI Tech attends Access China 2018 conference; our key takeaways are:

Total order intake grew more than 10% in 2017 to c.Rmb42bn and brought orderbacklog to c.Rmb30bn now (vs. c.Rmb25bn as end-16). This should supportearnings delivery in 2018, in which NARI targets 15-20% growth.

Power grid automation: For full-year 2017, management estimates that thepower grid automation segment has grown c.20% yoy, in line with 9M17performance. This was primarily driven by a 70% increase in grid distributionautomation, riding on significant tender size expansion, while grid dispatch wasflat and substation automation recorded mild growth (c.3-5%). Looking forward,management believes that grid distribution and utilization automation businesslines will continue to see robust growth in next few years, as gridcos are nowincreasingly shifting investment towards smart automation equipment that arecloser to the end-user side. State Grid recently announced that it would double thedistribution automation centralized tender rounds to four in 2018. Grid dispatchand substation automation are expected to stay flat, until 2019-20 when thereplacement cycle kicks in.

DC transmission and power electronics: Given that UHVDC project approvalis slowing down, management reckons the risk of potential UHVDC salescontraction this year, especially for Purui Engineering. However, overall powerelectronics business is expected to rise steadily, thanks to: 1) enhanced efforts ingrowing non-DC transmission sales (e.g., Unified Power Flow Control), which hasalready exceeded DC; and 2) increasing exports. The delay in Zhangbei FlexibleHVDC transmission project tender (to 1Q18 vs. planned 4Q17) leads to flat orderintake for NR Electric last year, but earnings delivery is still expected this year.Management targets Rmb2.5bn orders from this project, out of est. Rmb5bn totaltender size.

Power communication and information: This segment recorded c.20% revenuegrowth in 2017. Management holds an optimistic view on its outlook and expectsits growth to further accelerate in next few years, given that State Grid plans toinvest Rmb50bn in power communication by 2020, doubling from Rmb25bn now.

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