Incident description Leshan Electric Power issued an announcement on the 2016 semi-annual performance increase. It is expected that the net profit attributable to shareholders of listed companies in the first half of 2016 will be between 150 million yuan and 175 million yuan, an increase of 300%-370% compared to 37.088 million yuan in the same period last year. Incident reviews confirmed that non-recurring revenue of $120 million, reduction in losses from poor assets, and growth in main business led to a significant increase in performance. In the first half of 2016, in accordance with relevant decisions and the bankruptcy ruling of Ledian Tianwei, the company returned an estimated debt of about 37 million yuan, and won a lawsuit against Baoding Tianwei to confirm claims of 73.8 million yuan and interest, increasing the company's non-recurring revenue by about 120 million yuan and greatly improving the company's performance in the first half of the year. In addition, Mojiang Coal Power, the holding subsidiary, drastically reduced losses year-on-year due to the completion of personnel placement and disposal of some assets (loss of 257.35,500 yuan in the same period last year), and the negative impact of poor assets gradually receded; in the first half of the year, the company's electricity, gas, and water sales all increased year-on-year, with increases of 27.91%, 10.84%, and 4.57% respectively. Many of the company's main businesses simultaneously boosted operating income and boosted the company's performance in the first half of the year. Expectations of an abundance of incoming water have been verified, and the cost structure of electricity sales has been greatly optimized. In the first half of 2016, the company achieved a power generation capacity of 276.31 million kilowatt-hours, an increase of 69.58% over the previous year due to the combined effects of abundant incoming water in the watershed where the subsidiary power plants are located and Chuanqian Electric Power acquired last year. Excluding the Chuanqian electricity portion, the company achieved a power generation capacity of 24.365 million kilowatt-hours, a year-on-year increase of 49.54%, which partially validates this year's Fengshui forecast. Since the county-level electricity sales price of the Sichuan Electric Power Company is 0.3336-0.5839 yuan/kilowatt-hour (general industrial, commercial and chemical fertilizer electricity consumption was reduced by 0.87 cents/kilowatt-hour from June 1), which is far higher than the company's small hydropower generation costs, the high level of incoming water has greatly optimized the company's electricity sales cost structure. Coupled with the year-on-year increase in sales volume in the electricity sales business, the company is expected to effectively mitigate the impact of the reduction in general industrial and commercial electricity prices and the cancellation of abundant and dry electricity prices on the sales side. Actively promote the integration of excellent assets and expand the scope of main business, and join hands with Apple to open up new energy business development prospects. In terms of main business, the company completed the acquisition of Chuanqian Electric Power in 2015, and its wholly-owned subsidiary Hongya Huaxi Electric Power Co., Ltd. completed the acquisition of electricity assets in the southern mountainous area of Hongya, and expanded its own hydropower stations, grid-connected hydropower plants, and power sales areas. The equity acquisition of Daduhe Electric Power Company, which was managed by the company in 2012, is also progressing at an accelerated pace. Dadian has 5 power stations with a total installed capacity of 108,500 kilowatts and a built-in network of 306,100 kilowatts. The power supply network covers 19 townships in Ebian Yi Autonomous County. At that time, the company's main business is expected to expand again through Dadian. Furthermore, in April 2015, the company announced that the participating company, Sichuan Shengtian New Energy, plans to cooperate with Apple to jointly operate the 40MW photovoltaic power plant project of Hongyuan Huanju and Zuoergai Huanju. The company indirectly holds 12.10% of the shares in the photovoltaic power plants. According to the announcement of Zhonghuan Co., Ltd., the two photovoltaic projects have all been connected to the grid for power generation, and the company is expected to achieve continuous development of the new energy business in the future. Investment recommendations and valuation: The company's 2016-2018 EPS is expected to be 0.359, 0.246, and 0.256, respectively, considering 1) the main business will simultaneously achieve an increase in sales volume and cost reduction due to abundant incoming water and a recovery in demand; 2) actively handle poor assets and litigation disputes, and the negative impact gradually subsides; 3) promote the acquisition of Daduhe Electric Power Company to expand its main business and cooperate with Apple to actively develop new energy business, and maintain the “increase in holdings” rating. Risk warning: systemic risk, less incoming water than expected risk, project progress falling short of expected risk