Dynamic matters The company released its 2013 semi-annual report. In the first half of the year, the company achieved operating income of 3.119 billion yuan, an increase of 3.24% over the same period last year; net profit attributable to owners of the parent company was 210 million yuan, an increase of 6.58% over the same period last year; and basic earnings per share of 0.18 yuan. Main points: Revenue and net profit increased slightly in the first half of the year. The company achieved operating income of 3.119 billion yuan, an increase of 3.24% over the previous year; realized net profit attributable to shareholders of listed companies 210 million yuan, an increase of 6.58% over the previous year. Both revenue and profit increased slightly. Power generation reached 2,866 billion kilowatt-hours, a year-on-year decrease of 18.63%; electricity sales reached 3.486 billion kilowatt-hours, a year-on-year increase of 9.69%; and gas sales volume reached 79.47 million cubic meters, an increase of 163.41% year-on-year. Among the sub-businesses, the power generation business achieved operating income of 921 million yuan, a year-on-year decrease of 19.37%; operating costs of 800 million yuan, a year-on-year decrease of 20.17%; and a gross profit margin of 13.16%, up 0.87 percentage points from the same period last year. The decline in power generation revenue is mainly due to a decrease in power generation volume compared to the same period last year, while benefiting from falling coal prices, and a slight increase in gross margin. The power distribution business achieved revenue of 1,986 billion yuan, an increase of 12.58% over the previous year; operating costs of 1,538 billion yuan, an increase of 9.13% over the previous year; and a gross profit margin of 22.52%, an increase of 2.45 percentage points over the same period last year. The increase in revenue from the power distribution business was mainly due to the increase in electricity sales volume and changes in the power supply structure. This business contributed 60% of the company's revenue and 80% of profit. The gas business achieved revenue of 168 million yuan, an increase of 173.96% over the previous year; operating costs of 156 million yuan, an increase of 154.48% over the previous year; and a gross profit margin of 7.32%, up 7.10 percentage points from the same period last year. The increase in revenue from the gas business is mainly due to the increase in gas sales volume. The heating business achieved revenue of 307.582 million yuan, an increase of 5.41% over the previous year; operating costs of 37.78084 million yuan, an increase of 47.32% over the previous year; and a gross profit margin of -22.60%, down 34.88 percentage points from the same period last year. Asset restructuring helps transform “integrated energy” The company announced an overall plan to issue shares to purchase assets and raise supporting capital in March. The company plans to purchase assets and raise supporting capital from International Electric Power and Shanxi Xingrun Coal and Coke Co., Ltd.'s non-public shares. The underlying assets purchased on the exchange belong to coal trade and mining business, which is conducive to the company's formation of a diversified industrial pattern including electricity production and supply, coal mining, coal railway trade, gas supply, etc., to further promote the transformation to “integrated energy.” Meanwhile, the transfer of international power shares has been completed, forming Jinneng's indirect holding of the company. Jinneng also holds shares in the Coal Marketing Group and International Power, and the company will become a platform for Jinneng to implement its capital management strategy. Investment advice: Within the next six months, give a “prudent increase in holdings” rating. Without considering asset injection, we predict that the company's operating income will increase by 5.78% and 9.17% respectively in 2013-2014, and that net profit attributable to the parent company will achieve annual increases of 17.57% and 18.33%. The corresponding diluted earnings per share are 0.38 yuan and 0.45 yuan, and the corresponding dynamic price-earnings ratios are 15.74 times and 13.30 times, and the company's valuation is slightly higher than the industry average. We believe that the company's business growth is relatively stable, and that Jinneng's indirect holding is conducive to the company's transformation into a comprehensive energy enterprise, giving the company a “cautious increase in holdings” rating. Follow the progress of asset restructuring.