Regulated expenses increased, and net profit fell 10% year over year. The company's 2012 operating income was 3,574 billion yuan, up 11% year on year; net profit attributable to listed companies was 110 million yuan, down 10% year on year; and achieved earnings per share of 0.32 yuan. The main reason for the year-on-year decline in net profit is due to a sharp increase in various expenses, including a year-on-year increase of 112 million yuan in financial expenses, an increase of 33 million yuan in management expenses, an increase of 44 million yuan in income tax expenses, an increase in asset impairment of 22 million yuan, etc.; the sharp increase in financial expenses was mainly due to the cessation of capitalization of interest on the commissioning of Dandong Jinshan Power Plant and an increase in new loans. Benefiting from falling coal prices and rising electricity prices, the profit of the power generation business increased. The company's feed-in electricity volume in 2012 was 10.2 billion kilowatt-hours, an increase of 7.22% over the previous year. The gross margin of the power generation business increased to 26.8%, an increase of 3.4 percentage points over the previous year; according to our estimates, the unit price of the company's standard coal fell by about 4-5% year on year in 2012. The profits of all of its power plants have improved. Among them, the Sujiatun power plant turned a loss into a profit, with a profit increase of 20 million yuan; the shareholding power plant Shenyang China Resources contributed 23 million yuan in profit, an increase of 13 million yuan over the previous year; and the new production of Jinshan Thermal Power in Dandong achieved a profit of 6.05 million yuan the year it was put into operation. It also participated in Baiyin Huahaizhou Coal Mine and achieved a profit contribution of 84 million yuan, an increase of 46 million yuan over the previous year. Performance growth depends on the completion of production of new units in the short term, and the progress of reserve projects in the medium to long term. In 2012, the 2*300,000 kilowatt unit of the Dandong Jinshan Power Plant, which is 100% owned by the company, was put into operation, and achieved a profit of 6.05 million yuan in that year. We expect the Dandong Power Plant to increase EPS by 0.11 yuan after reaching production in 2013. At the same time, the company plans to complete highly profitable power projects during the “12th Five-Year Plan” period, including Baiyinhua Jinshan Phase II (2*660,000 kilowatts, Kengkou power station), Sujiatun Jinshan Phase II (2*350,000 kilowatts, main thermal power unit, high utilization hours) mixed with sludge thermal power, and 250,000 kilowatt wind power project in Fuxin, etc., with a total installed capacity of more than 2.2 million kilowatts. We expect the company's installed capacity to grow rapidly over the next 3 years, driving a rapid increase in profitability. Rating: Overstocked. We expect the company's 2013-2014 EPS to be 0.67 and 0.70 yuan respectively, and the corresponding price-earnings ratio is 9.4 and 9.0 times. The factors driving the rapid increase in the company's profit mainly come from the continuous improvement in the profit of the original power plant and the incremental contribution of the Dandong power plant to performance. At the same time, considering that the company plans to put into operation a high-quality reserve project of more than 2.2 million kilowatts in the next 3 years, we think it is more appropriate to give the company 10-12 times PE in 2013, corresponding to a reasonable stock price of 6.7 -.8.0 yuan. Maintain the company's “increase in holdings” rating. Risk warning: large fluctuations in coal prices have led to rapid changes in costs; the decline in regional electricity demand has caused unit utilization hours to fall short of expectations; and construction progress of reserve projects is slow.