The first electric power listed company on the Shenzhen Stock Exchange is committed to building a comprehensive platform for energy and environmental protection. The company landed on the Shenzhen Stock Exchange in 1993 and was the first electric power listed company on the Shenzhen Stock Exchange, and the actual control was Shenzhen SASAC. Up to now, the company has put into production holding power generation capacity of 9.8903 million kilowatts, including 4.914 million kilowatts of coal power, 822500 kilowatts of hydropower, 872400 kilowatts of photovoltaic, 615400 kilowatts of wind power and 216 kilowatts of garbage power generation. In addition, the company also has urban gas projects in Huizhou, Chaozhou, Zhaoxian, Zhoushan, Atushi and other places, and 2018H1 has achieved 151 million cubic meters of gas sales. The company is committed to building an integrated environmental protection platform dominated by electric power, supplemented by garbage disposal and gas. In 2018, H1 electric power business achieved revenue of 6.913 billion yuan, accounting for 86.51% of the main business income, and 5.94% of urban gas business.

Coal-fired power units are at the bottom of profits, benefiting from falling coal prices and narrowing profits in the future. The proportion of the company's installed capacity of coal and power is about 50%. At present, the price of coal is high, and the profitability of the company's holding coal is at the bottom, which is sensitive to coal prices. we expect that with the gradual release of high-quality coal production capacity, coal prices will gradually fall next year, and the company's profits are expected to be gradually repaired. Northwest Yunnan-Shenzhen UHVDC was put into production in May this year, with an annual transmission capacity of 20 billion kilowatt-hours, accounting for about 25% of Shenzhen's current electricity consumption. Shenzhen's local units to be put into production during the 13th five-year Plan period are all gas units, totaling 2.4 million kilowatts, with a relatively limited scale. we expect the impact of external transmission on the utilization hours of local units to weaken marginally in the next few years. The annual transaction price difference of the long-term Association of Guangdong Province is-45.09% / kWh in 19 years and-76.6% / kWh in 18 years. The proportion of electricity in market-oriented transactions is expected to expand further next year, but the narrowing of the price gap will stabilize and rebound the company's comprehensive feed-in electricity price.

Vigorously develop renewable energy business, wind power is expected to become an important profit growth point of the company in the future. In addition to the traditional thermal power sector, the company currently has 822500 kilowatts of hydropower, 6154kW of wind power and 8724kW of photovoltaic power. Among them, the company's hydropower distribution area is wide, the layout is reasonable, and the overall performance is relatively stable; photovoltaic is mainly acquired, and the company has more than 1.2 million kilowatts of wind power projects under construction. Assuming that all the projects under construction and planning are put into production in 2020, the company's wind power installed capacity will increase by 250% compared with the present, and the wind power business will become the main profit growth point in the future.

Shenzhen municipal solid waste incineration capacity is seriously insufficient, and the company's garbage disposal capacity doubled in 2019. The company is transporting 9 garbage treatment plants with a total treatment capacity of 10550 tons per day, including 5450 tons per day in Shenzhen. At present, the average daily output of municipal solid waste in Shenzhen is about 22000 tons, while the incineration capacity is only about 7500 tons per day. The company is currently under construction in Shenzhen, with a total capacity of 1.03 million tons per day, which is expected to be put into production in 2019, when Shenzhen's waste incineration capacity still can not meet the "zero landfill" demand of primary waste. the gap in waste incineration capacity ensures the company's capacity utilization in the Shenzhen project, and the company's waste disposal business is expected to achieve explosive growth.

Profit forecast and valuation: we predict that the company's operating income in 18-20 years will reach 184.72 yuan, 195.63 yuan and 19.603 billion yuan respectively, and the return net profit in 18-20 years will be 8.46,14.23 yuan and 1.819 billion yuan respectively. The current stock price corresponds to 25 times, 15 times and 12 times PE respectively. The company's PE and PB valuations are lower than the industry average. Coverage for the first time, giving a "overweight" rating.

Risk Tip: electricity demand in Guangdong Province is lower than expected, and natural gas prices have risen sharply.