Events:

1) the company announced on November 26 that it received 2.576 billion yuan based on the 80% equity REITS plan of Wuhu Power Plant; 2) the company announced on November 26 that it had transferred 40% equity of CLP to a limited partnership at a transfer price of 206 million yuan, while transferring Shanxi Shentou debt rights to the limited partnership with a total recovery fund of 560 million yuan. The company expects that the above transaction will generate a profit of 170 million yuan. 3) the company announced on November 7 that it transferred 1.185 billion yuan of receivables due to the default of renewable energy to the controlling shareholder, and the above transaction resulted in about 120 million transaction fees.

Main points of investment:

A number of measures were taken to optimize the withdrawal of assets, and the three transactions generated a total cash flow income of 4.3 billion. In the 14th five-year Plan Strategy release in October this year, the company clearly mentioned to increase the operation of new energy, and actively optimize and adjust the stock of coal and power assets. We believe that on the one hand, the overall profit prospect of coal power assets is not as good as that of new energy, and the disposal of some coal power plants with poor profitability will help to improve the asset quality of the company; on the other hand, the goal of the company's new energy transformation is ambitious. The great-leap-forward development of new energy during the 14th five-year Plan is subject to the company's cash flow level and asset-liability ratio. Disposing of part of coal power in a reasonable way can provide cash flow support for new energy transformation. According to our estimation, the above three transactions will bring 4.3 billion cash flow to the company. Assuming that the capital ratio of the new energy project is 20% and the cost is 5 billion / GW, the above cash is sufficient to support the development needs of the 4.3GW project. Where:

1) CLP Shentou 40% equity transfer consideration 1.3PB, the price is higher than the current secondary market valuation. China Electric Power, Dongfang Capital Management and State Power Investment Management jointly established a limited partnership, of which China Electric Power contributed 268 million yuan accounting for 35%. Shanxi Shentou, a wholly owned subsidiary of the company, sold its 40% stake in CLP Shentou to a limited partnership at a consideration of 206 million yuan. After the completion of the transfer, the company held a cumulative 54% stake in CLP Shentou, but its direct shareholding was reduced to 40%. CLP Shentou becomes a joint venture of the company and is accounted for by the equity method. At the same time, Shanxi Shentou sold the 560 million yuan debt owed by CLP Shentou to a limited partnership at a price equal to the face value of the debt. The company can get a profit of 170 million yuan from this sale, which will help to improve the performance of 2021. Based on CLP's net assets of 394 million yuan on September 30, the selling price of 40% equity is 206 million yuan, corresponding to 1.31 times PB, which is much higher than the company's current overall PB (0.87 times). At the end of June, the installed structure of the company is about 1500 kilowatts of coal power, 5.45 million kilowatts of hydropower and nearly 8 million kilowatts of new energy. considering that the secondary market valuation of hydropower and new energy assets is significantly higher than that of coal power assets, the price of the PB is much higher than the market expectation. on the one hand, the proceeds will help the company's new energy transformation, on the other hand, the price will help drive the revaluation of the company's existing coal power assets.

2) Wuhu Power Plant REITS is the first thermal power enterprise REITS product in China, and mode innovation contributes to the transformation of new energy. In terms of the transaction structure, China Electric Power will transfer 100% of the wholly-owned Wuhu Power Company to a limited partnership (special purpose vehicle), the special plan and its asset-backed securities holders hold 80% of the special purpose vehicle, and China Electric Power holds 20% of the equity (but still listed); the underwriters will issue asset-backed securities with a total amount of 2.576 billion yuan in the form of REITS-like products. Through the special plan to issue REITS products, the company has successfully securitized traditional coal-fired power generation assets, which will help to open up new business channels of group asset securitization.

3) transfer the arrears of new energy subsidies to major shareholders, and the effect of low-cost financing + reducing asset-liability ratio is prominent. From the point of view of the transaction structure, the company transferred 1.185 billion yuan of accounts receivable resulting from renewable energy subsidies to the state, and the state electricity investment company subsequently set up a trust to transfer the accounts receivable to the trust to issue asset-backed bills in the interbank market. The company needs to bear the service fee for the transaction and the interest on the issuance of asset-backed bills, totaling 120 million yuan. In other words, the company reduced accounts receivable by 1.185 billion yuan and received 1.065 billion yuan in cash. The overall cost of the above transaction is low, and can help the company to reduce the asset-liability ratio. Cash from the deal and debt space are expected to continue to be used for the development of new energy projects.

It is expected that new 50GW new energy will be installed in the 14th five-year Plan, and the goal of withdrawing funds from various measures will be achieved as scheduled. In the company's 14th five-year Plan, the company plans to achieve more than 90% of new energy by 2025. We assume that the installed scale of hydropower and gas power will remain unchanged, while the scale of coal power will be reduced by 50%. In order to achieve the above goals, more new energy sources will be installed in the 14th five-year Plan than 50GW. Up to now, the company has landed the scenery project 10gw, locked the scenery resources 10gw, reserved the scenery resources 30gw, and realized the virtuous circle of "landing a batch, locking a batch, reserving a batch". The company is rich in project resources, and the core bottleneck of future development is cash flow. Through flexible equity cooperation and financial means, the realization of accounts receivable and coal and power assets, raise sufficient funds for new energy development, we believe that the company's 14th five-year new energy development goal is expected to be achieved as scheduled.

Profit forecast and rating: taking into account the company's grand 14th five-year Plan and new business growth pole, the company's homing net profit forecast from 2021 to 2023 is 19.29,30.4 and 4.03 billion yuan, respectively. The current share price corresponds to a PE of 15 times, 10 times and 7 times, respectively, which is lower than that of comparable companies and maintains a "buy" rating.

Risk hint: there are variables in asset restructuring and policy uncertainty.