Main points of investment:

The performance in 2016 fell by 36.52% and the performance in 2017Q1 dropped by 62%, basically in line with expectations:

According to the 2016 annual report and 2017Q1 performance forecast, the company achieved operating income of 2.381 billion yuan in 2016, down 7.01% from the same period last year, and the net profit attributed to the parent company was 283 million yuan, down 36.52% from the same period last year. The corresponding EPS is 0.51 yuan. In the fourth quarter, the operating income was 693 million yuan, down 66.32% from the same period last year, up 47.13% from the previous year; the net profit attributed to the parent company was-2 million yuan, down 100.76% from the same period last year and 104.23% from the previous year. The corresponding EPS in the fourth quarter was 0 yuan. The profit distribution plan is to pay a cash dividend of 1 yuan for every 10 shares and to increase 10 shares for every 10 shares. The profit in the first quarter of 2017 is expected to be 65 million yuan, down 62% from the same period last year, corresponding to 0.118 yuan in EPS.

Thermal power business decline, photovoltaic stable development; profitability declined significantly: during the reporting period, the company's performance declined significantly. This is mainly because the core thermoelectric assets are greatly affected by price reductions, rising costs and declining utilization hours: 1) electricity prices and heating prices were respectively reduced by 4.17min / kWh,5.2 / GJ;2 in the first half of the year) the rapid rise in coal prices in the second half of the year has a greater impact on costs; 3) equipment maintenance and other impact on the utilization of power generation hours. In 2016, the company's thermal sales were 17.4526 million GJ, down 6.91% from the same period last year; electricity sales were 4.4114 million kWh, up 2.41% from the same period last year. Among them: 1) the revenue of subsidiary Liangcun thermal power is 1.374 billion yuan, down 8.5% from the same period last year, and the net profit is 278 million yuan, down 32.46% from the same period last year. 2) the income of Shijiazhuang heating company is 872 million yuan, down 7.01% from the same period last year, and the net profit is 40 million yuan, down 10.28% from the same period last year. 3) in terms of new energy power generation, Cangzhou Company and Hebei Yixian Company achieved an income of about 140 million yuan and a net profit of about 42 million yuan, an increase of more than 40 percent over the same period last year. In terms of profitability, the company's overall gross profit margin and net profit margin were 22.02% and 11.87% respectively, down 9.54 and 5.52 percentage points from the same period last year.

During the period, the expense rate dropped sharply, and the turnover of accounts receivable accelerated: the company's management and financial expenses in 2016 were 57 million yuan and 54 million yuan respectively, down 16.78% and 49.52% respectively from the same period last year. During the period, the expense rate decreased by 2.21 percentage points to 4.68%, of which the management and financial expense rates decreased by 0.28% and 1.92% to 2.39% and 2.29% respectively compared with 2015. In 2016, there was a net cash outflow of 474 million yuan from operating activities, an increase of 34.31 percent over the same period last year, and cash from sales of goods totaled 2.651 billion yuan, up 1.87 percent from the same period last year. The amount received in advance at the end of the period was 298 million yuan, an increase of 19.74% over the same period last year. Accounts receivable at the end of the period was 331 million yuan, down 21 million yuan from the beginning of the period, and the turnover days of accounts receivable increased by 17.86 days to 51.63 days. The ending inventory was 140 million yuan, an increase of 66 million yuan over the beginning of the period, and the inventory turnover days rose 7.82 days to 20.84 days.

Equal emphasis on independent development and cooperative mergers and acquisitions, and transformation of new energy integrated service providers: the company pays equal attention to independent development and cooperative mergers and acquisitions, provincial construction and non-provincial development, energy development and comprehensive energy services, we will increase the reserve of renewable energy, emerging green energy, multi-co-supply, multi-energy complementary and other projects. By the end of 2016, the company has grid-connected photovoltaic power station 70MW, and other photovoltaic power station projects such as Shanxi Heshun 200MW, Yangquan leader 100MW, stabilizing lock spring 50MW, Shanxi Lingqiu 400MW wind and thermal complementary projects, Wuchuan 50MW wind power and other projects are under construction, which will usher in the peak period of grid connection one after another. At the same time, since 2017, the company has successively signed strategic cooperation agreements with Shanghai Airlines Industry, SPIC Sichuan, Shanxi installation, Kyushu Zongheng and other companies, together with branches inside and outside the group and central enterprises and local state-owned enterprises outside the group to speed up the layout of new energy.

The company invested 201 million yuan in 2016 to set up a wholly-owned subsidiary Hebei Liangneng Power Sale Co., Ltd.

Actively participate in the market competition on the selling side, seize the opportunity of power system reform, speed up the development of smart energy, extend and expand the company's power business, enhance the company's competitiveness in the regional power market, and share the dividend of power system reform.

The core target of the development and operation of clean energy and allotted electricity in Xiongan New area: on April 1, the CPC Central Committee and the State Council established Xiongan New area from the strategic perspective of state affairs and millennium plans. The seven key tasks include the requirements of building a green and intelligent new city and an ecological city, which are closely related to the construction of new energy. As the only listing platform of the State Power Investment Corporation in Hebei, the company transformed the comprehensive energy supplier of new energy, and signed a cooperation agreement in Kyushu to transfer the new energy assets of Hebei and North China of the group. The company has obtained the planning and development of clean energy projects and comprehensive smart energy projects in the comprehensive land development area along the Langli Gubao intercity railway project and in the vertical and horizontal direction of Kyushu, taking the lead in the layout of clean energy development in the new area. At the same time, Hebei Liangneng Power sales Company established by the company will benefit from the development of electricity distribution business in Xiongan New area.

Act quickly to support Xiongan's development: according to China Power Network, Dongfang Energy (Hebei) strives to improve relevant organizations and strengthen staffing in order to accelerate the development of the company in Xiongan New area. First of all, a leading group for the development of Xiongan New area is set up in the company, with the chairman as the group leader and the responsible leader as the deputy leader, who is fully responsible for the leadership of the company's Xiongan New area development work and is fully responsible for the company's Xiongan New area development work. Study and decide on major issues, coordinate and promote development work as a whole. Secondly, the preparatory office of Xiongan Dongfang Energy Co., Ltd., a national power investment group, was set up in Xiongan New area, which is responsible for project development, pre-project work and project construction, production and operation management in Xiongan New area. In addition, the company is stepping up the allocation of Xiongan Company (Xiongan Project Department) staff, clear institutional standards, for the development of talent protection.

The process of national reform has been accelerated and the injection of assets has been accelerated: according to the Central Economic work Conference at the end of 2016, the electric power industry ranks first among the seven major industries in the reform of state-owned enterprises, and the reform process will be accelerated. The asset securitization rate of SPIC Group is the lowest among the five major power generation groups, and there is more room for improvement in the future. SPIC Hebei Company owns and operates 600MW, a new energy asset, and has more than 700 MW under construction, which will provide a good underlying asset for SPIC Group to enhance the asset securitization rate, as well as a basic guarantee for the company to rapidly expand, strengthen and optimize its clean energy platform.

Investment suggestion: the company's net profit from 2017 to 2019 is expected to be 2.33,3.06 and 383 million yuan respectively, down 17.6%, 31.3% and 25.3% respectively compared with the same period last year. The company will be given 50 times PE in 2017 with a target price of 21.1yuan, maintaining the company's "buy" investment rating.

Risk hint: the injection of group assets is not as expected; the production progress of the new project is not as expected; the profit of the project is not as expected; and the financing is not up to expectations.