What's new We visited Sieyuan Electric and spoke with its management aboutthe company’s operations in 1Q14. Comments Sales model change weighed on 1Q14 earnings. Sieyuan started torestructure its sales force in 4Q13 and build a customer-basedstructure in 1Q14. This process hit new orders and order delivery, butthe situation is expected to return to normal from mid-2014, and thenew sales model is conducive to securing new clients. Rmb900mn of new orders acquired in 1Q14 and positive ordergrowth expected for 1H14. New orders fell by 20% YoY (vs. Rmb1.1bn in 1Q13) to Rmb0.9bn due to the sales team restructuringand economic slowdown. New orders are expected to rise 25% YoYto Rmb1.4bn in 2Q14 and achieve positive growth in 1H14. Full-year order growth 15%, mainly driven by GIS orders. Thecompany seized Rmb1.1bn in GIS orders last year (Rmb0.8bn 110KVand Rmb0.3bn 220KV) and is expected to obtain Rmb1.8bn this year(Rmb1.1bn 110KV and Rmb0.7bn 220KV). Gross margin to slide a little for the full year. Due to changes inproduct mix, gross margin narrowed 5ppt YoY to 38% in 1Q14. Witha higher proportion of revenue from other customers and GIS, grossmargin is expected to fall 2ppt to 38% in 2014. Focused on the main business and reinforcing internal strength. The electricity transmission and distribution market has a size ofnearly Rmb100bn and has room to consolidate. With a focus on itsmain business, the company will strive to build comprehensive R&Dand sales platforms to lay good groundwork for future growth. Valuation and recommendationWe trim 2014/15e revenue by 6%/8% and net profit by 8%/13%,mainly due to lower gross margin assumptions. The stock iscurrently trading at 15x/11x 2014/15e P/E. We cut our TP by 20%from Rmb24 to Rmb19, 20x 2014e P/E. Maintain BUY. Risks Worse than expected economic downturn.