Key investment points 2016H1 performance fell by 23.68%, in line with expectations: the company released its 2016 interim report. During the reporting period, the company achieved operating income of 1,217 billion yuan, a year-on-year decrease of 15.12%; net profit attributable to the parent company was 243 million yuan, a year-on-year decrease of 22.25%, corresponding to an EPS of 0.44 yuan. Among them, the second quarter achieved quarterly operating income of 476 million yuan, a decrease of 35.85% over the previous month, and realized net profit attributable to the parent company of 72 million yuan, a decrease of 57.77% over the previous month, corresponding to an EPS of 0.13 yuan. Lower electricity prices and lower utilization hours dragged down thermal power performance, and gross margin fell by 4 percentage points: judging from the operating performance of subsidiaries: 1) Liangcun Thermal Power achieved operating income of 679 million yuan, a year-on-year decrease of 17.82%, and net profit of 243 million yuan, a year-on-year decrease of 24.91%; Shijiazhuang Heating achieved operating income of 456 million yuan, a year-on-year decrease of 13.84%, and net profit of 22 million yuan, a year-on-year decrease of 9.20%. The decline is mainly due to a decrease in electricity prices of 4.17 minutes/degree in the first half of the year, a reduction in heating prices of 5.2 yuan/GJ starting in the second quarter, and a year-on-year decline in the number of hours used by thermal power units. Thermal power contributed a total of 1,135 billion yuan to operating income and achieved net profit attributable to the parent company of 203 million yuan, which is the company's main source of revenue and profit. 2) Cangzhou Company (50MW PV), the company's new energy subsidiary, achieved revenue and net profit of 44 million yuan and 19.59 million yuan respectively, up 7.47% and 28.04% year-on-year, with a corresponding power generation time of 677 hours. Yixian Company (20MW PV) achieved revenue and net profit of 44 million yuan and 3.91 million yuan, down 18.49% and 49.64% respectively from the previous year. The corresponding number of power generation hours was 704 hours. The main reason for the decline in performance was the provincial electricity supplement price of 0.3 yuan/year, which expired at the end of 2015. In terms of profitability, although the unit price of the company's integrated standard coal was reduced by 19.33% year on year, and unit coal consumption decreased, the gross margin of electricity and heat decreased by 4.21 and 4.32 percentage points to 38.22% and 17.43%, respectively, due to the reduction in electricity and heat prices and the reduction in the number of hours used. The consolidated gross margin was 31.51%, down 3.99 percentage points. On a month-on-month basis, the overall gross profit margin and net profit margin for the second quarter fell 4.71 and 7.87 percentage points from the first quarter to 28.65% and 15.16%, respectively, due to the quarterly impact of the number of hours used for heat and electricity. Invest 200 million yuan to set up a power sales company and actively participate in the electricity sales market to share the dividends of electricity reform: the company invested 201 million yuan to establish a wholly-owned subsidiary, Hebei Liangneng Electricity Sales Co., Ltd. Actively participating in market competition on the electricity sales side is conducive to leveraging the company's cogeneration advantages, seizing the opportunities of power system reform, accelerating the development of smart energy, extending and expanding the company's power business, enhancing the company's competitiveness in the regional electricity market, and sharing the dividends of power system reform. The pace of independent development of the clean energy industry is accelerating, and 2016-2017 will usher in a peak of production of new projects: the company is based on expanding, strengthening, and improving listed companies to further accelerate the pace of developing new energy in surrounding provinces and cities such as Shanxi and Inner Mongolia: 1) In terms of wind power, projects in Heshun in Shanxi, Lingqiu in Shanxi and Wuchuan in Inner Mongolia are progressing rapidly, while actively seeking opportunities for wind power cooperation and acquisition to continue to expand development space; 2) In terms of photovoltaics, six projects in the province, including Huanghua and Chengde, will be put into operation in mid-2016, Lingshou Photovoltaics, Shijia Photovoltaics, etc. Construction of the Zhuangzhong Automobile distributed photovoltaic project was completed, and it was settled outside the province, The Shanyin PV project strives to commence construction. At present, an agreement has been reached on the 380MW photovoltaic power plant and the 600MW wind farm project. It is expected that 2016-2017 will usher in a peak of commissioning of the new project. It is expected to become a platform for China Power Investment's new energy asset securitization, and implementation of the injection commitment is close: by the end of 2015, China Power Investment Group's cumulative installed capacity reached 107.40 GW, and the share of clean energy reached 40.06%, while the asset securitization rate was the lowest among the five major power generation groups, so there is plenty of room for future improvement. Group companies are integrated to create a special new energy operation platform, which can carry out specialized management, reduce competition in the industry, and expand financing channels. We judge that the company will be the best platform for the securitization of China Power Investment Group's new energy assets. By the end of 2015, China Power Investment Corporation Hebei had 1.34 GW of photovoltaic projects, of which 413.7 MW was connected to the grid and 927 MW projects were under construction or proposed; it had 1.15 GW of wind power projects, of which 148.5 MW was connected to the grid, and 1 GW was under construction or proposed. It will provide a good target asset for China Power Investment Group to increase its asset securitization rate, and also provide a basic guarantee for the company to rapidly expand, strengthen, and improve its clean energy platform. Furthermore, China Power Investment Group's asset injection price (primary market value) is relatively low, and there is plenty of room for asset appreciation in the secondary market. In 2013, the group company promised to inject high-quality assets from the Hebei branch into listed companies within three years to resolve competition issues in the industry. The commitment expired in January 2017, and it is expected that the implementation of asset injection will be imminent. Investment suggestions: The company's 2016-2018 EPS is expected to be 0.72 yuan, 0.91 yuan, and 1.08 yuan respectively, and the performance growth rates are -10.45%, 25.43%, and 19.45%, respectively. In 2016-2017, the company will experience a peak in the commissioning of new energy projects. China Power Investment Group's asset injection expectations are strong. Considering the high growth of the company's “big groups and small companies”, it also has multiple themes such as state-owned enterprise reform, Beijing-Tianjin-Hebei, the Winter Olympics, and nuclear power, giving the company 25 times PE in 2017, with a target price of 23 yuan, maintaining the company's “buy” investment rating. Risk warning: Group asset injection falls short of expectations; progress in the commissioning of new projects falls short of expectations; project profit falls short of expectations; and financing falls short of expectations.