Introduction to this report:

The controlling shareholder, Energy Investment Group, plans to change its commitment to compete in the industry, and focus more on the main renewable energy business at the level of listed companies.

Key points of investment:

Maintain the “increase in holdings” rating: maintain the 2023-2025 EPS of 0.54/0.99/1.12 yuan, maintain the target price of 16.52 yuan, and maintain the “increase in holdings” rating.

Incident: The company received the “Letter of Commitment to Avoiding Competition in the Industry” from the controlling shareholder Energy Investment Group. There is no substantial competition between the hydropower, thermal power, and waste-to-energy power generation business carried out by the Energy Investment Group and the new energy power generation business of listed companies. The original promise relating to the hydropower, thermal power, and waste-to-energy business does not need to be fulfilled.

The controlling shareholder promised changes, and the listed company focused on the new energy business. We believe: 1) There is no actual competitive relationship between the company's new energy power generation business and the group's non-new energy power generation business in terms of electricity sales and prices. It is expected that the change in the group's commitment will have limited impact on the new energy power generation business of listed companies; 2) There is a certain difference between the new energy power generation business and the business models of hydropower, thermal power, waste-to-energy power generation, etc. We believe that this change in the Group's commitment will help listed companies focus on the main NEV power generation business. Furthermore, the company has signed a “Framework Agreement for Fostering on your behalf” with the controlling shareholder Energy Investment Group and its wholly-owned subsidiary, Green Energy Group. We believe that while the proxy cultivation method solves the competition problem in the company's new energy business, it is also expected to help all entities within the Energy Investment Group collaborate with each other to seize opportunities for the rapid development of the new energy market in Yunnan Province.

New energy installations have been gradually realized, and annual performance has grown at an accelerated pace. As of June 2023, the company put into operation 700,000 kilowatts of installed wind power, +34.1% compared to the end of 2022. The company proposed to strive for the total installed capacity of new energy to exceed 2 million kilowatts by the end of 2023. We expect that 2H23's new energy production installation will soon enter a period of acceleration, and the company's performance is also expected to accelerate with the commissioning of new energy projects.

Risk warning: electricity prices are lower than expected, new energy installations are lower than expected, etc.