Investment Highlights reported an interim performance of 0.44 yuan, slightly lower than expectations. In the first half of 2016, the company's main revenue was 1.22 billion yuan, down 15.1% year on year; gross margin fell 4.0 percentage points year on year to 31.5%; net profit was 240 million yuan, down 22.3% year on year; and EPS was 0.44 yuan. On a quarterly basis, Q2 revenue fell 35.9%, gross margin fell 4.7 percentage points to 28.6%, net profit fell 57.8%, and quarterly EPS was 0.13 yuan. Performance fell short of expectations due to the increase in one-time costs of service business revenue. At the beginning of the year, the company's feed-in electricity prices were lowered, and since April 1, the price of standard coal fell by 19.3% and the consumption of coal supplied by 1.2% in the first half of the year, which together led to a decrease of 4.21%/4.32% in the gross margin of the electricity and heat business, respectively. In terms of interest, the reduction in loans and financial expenses realized under interest rates decreased by 54.8% year over year. It is worth noting that the revenue from the service business is 520,000 yuan and the cost is 19.34 million yuan (service revenue of 360,000 yuan in 2015, cost of 100,000 yuan). The slightly lower performance of the company's expected 5% performance is mainly due to this factor. At the same time, we expect it to be a one-time factor. Clean energy projects under construction have been implemented, and electricity sales companies have been set up to seize the opportunities. On July 5, the company announced a capital increase of 240 million yuan for projects such as Heshun Wind Power and Pingding Photovoltaics, marking that the clean energy projects under construction have entered the implementation stage. According to 15% ROE, the company's performance will be increased by 0.4 billion yuan, corresponding to EPS by 0.07 yuan, which is expected to become a new profit growth point for the next two years. At the same time, the company plans to establish Hebei Liangneng Electricity Sales Co., Ltd., with the aim of seizing the opportunities of electricity reform and enhancing the company's competitiveness and profitability. The company's industrial heat load accounts for about 70% of Shijiazhuang's industrial customers. In the future, it is expected that industrial users will be used to carry out a variety of integrated energy services with high added value, with broad prospects. The injection of surplus assets in Hebei is about to accelerate, and there is still room for imagination for cross-regional integration. As early as May 2013, China Power Investment Group made an asset injection promise to avoid competition among peers during the company's non-public offering. The expiration time is January 2017, and now it is getting closer. The scale of landscape assets that the Hebei company has not yet injected is about 600MW, and the profitability is strong. Once injected, the company's earnings per share will increase significantly. At the same time, the group's securitization rate is only 31%, which is far lower than that of other power groups (50%-60%), and the group has a strong desire to speed up asset securitization. The company actively operates new energy projects and is positioned in line with the Group's clean energy development strategy. Clean energy asset injection will be an effective means of increasing the securitization rate. Looking at the Group's unlisted clean energy installations, the installed capacity of hydropower, wind power and photovoltaics was 1616, 852 and 4.25 million kW respectively. Simulated estimates showed that their profits were 23.3 million, 13.6 million and 81 million yuan respectively; the total installed capacity of nuclear power investment was 3.1 million kW, with an estimated investment income of about 1 billion yuan. High profits and great possibilities bring huge room for imagination to integrate across regions. Risk warning. Asset injection progress fell short of expectations; rising coal prices impacted profits; and weak demand led to lower operating rates than expected. Maintain a “buy” rating. In view of the sudden increase in the company's service costs, the 2016 EPS forecast was slightly lowered to 0.68 yuan (previously 0.70 yuan), keeping the company's 2017/2018 EPS forecast of 0.80/0.89 yuan unchanged. The current stock price corresponding to PE is 25/21/19 times. The surplus asset injection promised by the parent company is expected to accelerate. At the same time, in the context of the Group's accelerated asset securitization, the company's cross-regional integration is still imaginable. The above factors are all likely to drive the company to achieve leapfrog development, so it should enjoy a certain valuation premium, give it 30 times PE in 2016, corresponding to the target price of 21.2 yuan, and maintain the “buy” rating.