Electricity generation hours in Liaoning Province are not optimistic, and thermal power companies are more defensive. In January-May, electricity consumption in Liaoning Province increased by 1.34% year on year, lower than the national growth rate of 5.82%, and the growth rate was sluggish. Heavy industry accounts for a relatively large share in Liaoning Province, and the economic downturn has had a large impact on the growth rate of electricity demand. In January-May, the installed capacity of thermal power in Liaoning Province increased by 3.47 million kilowatts, an increase of 11.28% over the previous year, and the installed capacity growth rate rebounded sharply. Considering the sluggish growth rate of electricity demand, it is estimated that the annual power generation hours are not optimistic. In the context of the economic downturn, thermal power companies had heating support in the first and fourth quarters, and power generation hours were still relatively guaranteed. They fully benefited from falling coal prices and were more defensive. With the exception of Bai Yinhua, all of the company's operations are thermal power units. In the current macro context, the company will fully benefit from falling coal prices, and its sensitivity is higher than that of other thermal power companies. The price of coal has entered a downward channel. The share of coal in the market is large, and fuel costs declined markedly month-on-month in the second quarter. The company's coal mainly comes from the Mengdong region, mainly market coal. We have observed the trend of coal prices in the eastern part of Mongolia. Taking the Xilingol Kengkou coal price in eastern Mongolia as an example, there was an accelerated rise in the second half of last year, rising from 220 yuan/ton per ton to a high of 270 yuan/ton in a relatively short period of time. Compared to port prices, prices in Kengkou entered a downward channel relatively late. They only began to decline in early May of this year. They have declined to the current 230 yuan/ton, down 14.81%, and have basically declined to the starting point of last year's increase. According to simple estimates, the average price of coal in Kengkou in Xilingol was 270 yuan/ton in the first quarter and 250 yuan/ton in the second quarter, down 7.14% from the previous year. Considering that the company's coal procurement mainly comes from the Mengdong region, it is expected that the company's fuel costs will fall mainly in the second quarter, and the company's fuel costs will drop significantly month-on-month in the second quarter. The second quarter's performance is expected to improve month-on-month, and the fourth quarter ushered in a peak performance period. We have analyzed that the company's fuel costs for the second quarter fell significantly from the first quarter, but the first quarter is the heating season, the company's power generation hours are good, and the power generation hours in the second quarter will decline slightly. However, considering that the company's fuel costs in the first quarter fell significantly from month to month, we believe that the company's performance in the second quarter is expected to improve month-on-month. If coal prices fall slightly in the second half of the year without a sharp rebound, the fourth quarter heating season will usher in a period of peak performance for the company. The project reserves are abundant. The company is currently carrying out preliminary work on three power plants, with a total holding capacity of 2.4 million kilowatts and equity installed capacity of 1,932,000 kilowatts. It is basically comparable to the company's current size, and has huge potential for future growth. Two of the three power plants reserved by the company are thermal power. The approval period for thermal power projects mainly depends on the local heat load level. Once the local heat load level is full, approval is imminent. Currently, after Sujiatun Phase I has been put into use, the local heat load is already quite full, so the approval speed of Sujiatun Phase II should be relatively fast. Furthermore, Baiyinhua Phase II belongs to the Kengkou Power Plant, supporting Baiyinhua Haizhou Open Pit Coal Mine Phase III. Currently, the company is seeking UHV supply to the Shanghai line (Ximeng-Nanjing, Huainan-Shanghai). UHV transmission makes power generation hours more secure, and profitability is better than that of phase 1. Profit forecasts and investment advice. We expect the company's earnings per share for 2012-2013 to be 0.47 and 0.71 yuan respectively (the 2013 performance takes into account targeted increases and dilution), and the corresponding price-earnings ratio is 16 and 10 times, respectively. The company's growth in 2013 is relatively certain, mainly due to the commissioning of Dandong Thermal Power and the approval of Baiyin Huahaizhou Open Pit Coal Mine Phase II. Considering that the company's thermal power is mainly defensive in the current economic environment, performance is expected to gradually improve month-on-month. We have given a “buy” investment rating. Investment risk. Higher coal prices than expected erode company profits; risk of approval of new projects; risk of continued decline in power generation hours; Baiyinhua coal mine was not approved as expected.