3Q21's profits and cash flow are under heavy pressure. Huadian International 3Q21 operating income 24.5 billion yuan, year-on-year + 2.9%; homing net profit-1.69 billion yuan, year-on-year turning loss (3Q20 homing net profit 1.25 billion yuan); operating cash flow-560 million yuan, year-on-year turning negative (3Q20 operating cash flow 7.6 billion yuan). We think it is mainly related to the sharp rise in coal prices.

Excluding the factors of new energy, the amount of electricity increased rapidly compared with the same period last year, and electricity prices continued to rise. We estimate that the online power of the company's 3Q21 is 57.4 billion kWh, which is + 13.0% compared with the same period last year. We believe that it is mainly related to the increase in electricity demand and the presentation of new energy assets. The average online electricity price of the company's 3Q21 is 0.411 yuan / kWh, which is + 0.01yuan / kWh (+ 3.6%) compared with the same period last year. We believe that excluding the listing of new energy assets, the year-on-year increase in thermal power prices of 3Q21 may be higher than the same period last year, or it may be mainly related to the expansion of the proportion of market electricity and the increase of market electricity prices compared with the same period last year (1~3Q21 accounts for 60.7% of the market, + 3.3 ppts year-on-year). The National Development and Reform Commission further deepens the market-oriented reform of feed-in electricity prices for coal-fired power generation: in principle, all coal-fired power generation electricity enters the electricity market, and the range of transaction prices in the coal-fired power generation market is expanded to no more than 20% in principle. We expect the electricity price of the company to continue the upward trend from 4Q21E.

Because of the high coal price, the investment income is difficult to hedge the losses of the main industry. Affected by high coal prices, the company's 3Q21 gross profit margin is-9.6% and operating cash flow is-560 million yuan, both of which are the lowest in a single quarter since listing. The 3Q21 investment income of the company is 760 million yuan (the investment income calculated by equity method is 760 million yuan), which is + 630 million yuan compared with the same period last year. We think that it is mainly related to the investment income of participating in Fuxin Development, but the investment income is difficult to hedge the loss of the main business. Taking into account the substantial increase in energy supply and price stabilization, capacity increase and price control measures gradually fall to the ground, we believe that coal prices are expected to improve, the company's 4Q21E main business profits or month-on-month improvement.

Attach importance to the value of dividends. According to the company's shareholder return plan: from 2020 to 2022, the annual profit to be distributed by the company in cash is in principle not less than 50% of the distributable profit in the consolidated statement realized in that year, and the dividend per share is not less than 0.20 yuan. We believe that under the significant pressure on profits, the absolute dividend value of the company appears. According to the calculation of Tuodi DPS (0.20 yuan), the bottom line of dividend return of Amax H is 5% / 9% respectively, and the dividend value is worth paying attention to.

Maintain the "better than the market" rating. We believe that the company's profits are under short-term pressure under high coal prices, but the market-oriented reform of electricity price has enhanced the bargaining power of thermal power companies, which is conducive to valuation repair. It is estimated that the return net profit of the company from 2021 to 2023 is 11.9,47.0 and 6.54 billion yuan respectively, and the corresponding EPS is 0.12,0.48,0.66 yuan respectively. With reference to the comparable company valuation (14 times PE and 1.3 times PB in 2022), the company is given a level of 12-14 times PE in 2022, corresponding to a reasonable value range of 5.76-6.72 yuan (corresponding to 0.8-0.9 times PB in 2022), maintaining a "better than the market" rating.

Risk hint: the higher-than-expected growth of coal prices is a drag on the company's profits, the growth of electricity demand is not as expected, and the investment return of participating Fuxin Development is lower than expected, and so on.