Clean energy accounts for the leading share of clean energy among domestic thermal power companies, continues to vigorously promote the growth of new energy installations, while actively transforming towards integrated smart energy. By the end of 2021, the company's holding installed capacity was 190531 million kilowatts, an increase of 13.66% over the previous year. Among them, the installed capacity of New Energy Holdings was 7.6589 million kilowatts, an increase of 31.22% over the previous year. Clean energy accounted for 55.24%, an increase of 6.11 percentage points over the previous year. In the future, the company will continue to balance the common development of efficient clean thermal power and clean energy, and the proportion of clean energy installed will increase steadily. The company effectively regards integrated smart energy services as a breakthrough in transformation and development, with digital and intelligent energy production, storage, supply, consumption and services as the main line, taking into account technology and economy, adapting to local conditions and promoting comprehensive smart energy project development with high quality.

The company is actively strengthening cost control, and at the same time benefiting from the country's stable price and supply of coal, the company's coal power and heating business earnings are expected to improve in 2022. Notice issued by the NDRC on February 24, 2022 on further improving the price formation mechanism in the coal market. The notice focuses on guiding coal prices to operate within a reasonable range, improving the transmission mechanism of coal and electricity prices, and guiding coal and electricity prices to form two important requirements mainly through medium- to long-term transactions. The company undertakes responsibility for electricity and thermal security in Shanghai. In 2022, the company aims to continue to increase the proportion of electricity and coal long-term guarantees in accordance with relevant policies to ensure that the company's coal-fired costs are controlled and operating conditions improve, so as to ensure the stable operation of normal urban coal-fired power supply and heating. In the first quarter of 2022, the company achieved an overall net profit of 101 million yuan, which is still lower than the level of the first quarter of 2020, but losses in the thermal power and heating business improved markedly.

The company accelerated the reform of state-owned enterprises in 21 years, set reasonable goals and implemented equity incentives to promote and guarantee the release of enterprise performance that exceeded expectations. As can be seen from the company's options exercise performance conditions, the company's performance-oriented indicators are mainly return on net assets, the compound growth rate of net profit, and the proportion of state-owned EVA and clean energy installations. They also basically reflect the company's future development strategies and business goals. The main focus is on return on capital and active development of clean energy. This stock option incentive can transform the company's development and operation strategy into enforceable quantitative indicators, stimulate the company's core employees to better implement the company's strategy, and take responsibility for business performance. It will be a favorable guarantee for the implementation of the company's business performance and business development strategy.

For the first time, the “increase in holdings” rating was covered. We expect that in 2022-2024, the company will achieve operating income of 350.35, 41,772 and 49.831 billion yuan, and net profit attributable to the parent company of 832 million yuan, 1,188 million yuan and 1,688 million yuan. The total share capital is 2,617 million shares, corresponding to EPS of 0.32, 0.45 and 0.65 yuan. The main points of the valuation are as follows: On July 6, 2022, the stock price was 10.84 yuan, corresponding to the market value of 28.37 billion yuan, and PE in 2022-2024 was about 34, 24, and 17 times. The company continues to steadily promote diversified energy development, maintain and expand the proportion of low-carbon new energy installed, and actively promote integrated smart energy business development. The goal is to become a leading regional low-carbon integrated energy supplier and fully benefit from the national dual-carbon strategy.

Risk warning: coal price control, new energy expansion progress, smart energy business expansion falling short of expectations.