1. The incident company announced its 2016 semi-annual report. In the first half of the year, it achieved operating income of 1.22 billion yuan, a year-on-year decrease of 15.1%, and attributable net profit of 240 million yuan, a year-on-year decrease of 22.3%. 2. Our analysis and judgment (1). Affected by the adjustment of electricity and heat prices, the net profit margin declined slightly. The company's operating income in the first half of the year declined slightly due to lower electricity prices and heat prices. However, the increase in coal prices reduced gross margin by nearly 4 percentage points, up 2 percentage points from the first quarter. As a state-owned enterprise, the company is a high-quality bank customer, and the financial expenses rate continues to remain low at around 2%. The scale of management expenses was also relatively stable, and the company's overall net profit margin declined only slightly. (2) The price of coal remains high, and the stock coal power business is under pressure. Coal prices are still the core factor in changes in the company's performance throughout the year. Looking at it now, considering the strict implementation of coal supply-side reforms, the decline in hydropower for two years, and the continued high temperatures this summer, coal demand may not have a low season this year, and coal prices may soon rise to around 500 yuan/ton. There is a lot of pressure on the profit level of the company's stock coal power business. (3) Future profit growth points come from the profit growth points of the various project companies under construction themselves. In addition to the Laiyuan 30MW photovoltaic power generation (74% completed) and Liangcun Thermal Power's 2X300MW high-pressure small project (99% completed), the 2X25MW and back-pressure units that have already been put into production, the 3.7MW distributed photovoltaic project in Changping, Beijing, and the 50MW distributed PV project in Pingding, Suoshun Town, Pingding, in addition to the 200MW distributed wind power project in Shanxi, which began construction in the second quarter. 3. Investment advice companies will benefit from the progress of state-owned enterprise reform and Beijing-Tianjin-Hebei electricity reform. On the one hand, from an industry perspective, 2016 was a year where state-owned enterprise reforms were gradually implemented, and the company was a small company under a large group; on the other hand, the company's thermal power pipeline network covered all industrial and commercial enterprises in the Xinhua District, Chang'an District, and the Economic Development Zone of Shijiazhuang, and the high-tech development zone, so there is a good foundation for developing electricity distribution and sales business. Maintain recommendation ratings. 4. Risks suggest that coal prices will continue to rise; feed-in tariffs will be lowered; and state-owned enterprise reforms have fallen short of expectations.