The company's aluminum and power sectors are still at a loss, coupled with the impact of asset impairment, profit release is lower than expected. However, in the long run, with the decline of impairment and the commissioning of new power units, the company's profit is expected to improve to a certain extent. As the company is still in a "broken" state, there is still room for valuation repair.

Earnings have improved for three years in a row, but asset impairment still affects performance release. In 2018, the company's operating income was 6.849 billion yuan / net profit was 661 million yuan, an increase of 8.13%, 27.44% and 0.92 yuan respectively over the same period last year. The performance was lower than we expected, mainly due to the impairment of the company's assets of 490 million yuan, exceeding our expectations. The profit distribution plan for 2018 is 0.28 yuan per share (including tax).

In 2018, the price of clean coal rose by 8.14%, and the loss of electricity business was obvious. In 2018, the company sold 128600 tons of raw coal and 5.22 million tons of washed coal (year-on-year changes of + 805% Maxim. 4%); the sales prices of raw coal / washed coal were 543 yuan / ton (+ 1.10% impulse 8.14% respectively), and the sales costs of raw / washed coal were 345 shock 528 yuan (year-on-year changes of-3.05% and 4.91% respectively). In 2018, the company generated 2.291 billion kilowatt-hours (year-on-year-4.62%), and the unit electricity price was 0.25 yuan / kWh (year-on-year-0.22%), but the kilowatt-hour cost increased significantly to 0.33 yuan / kWh (year-on-year + 26.93%). The processing volume of aluminum is 49700 tons (+ 106% compared with the same period last year), and the unit processing cost is 15.4 million yuan / ton (year-on-year-12.42%). The company plans to produce 8 million tons of raw coal, 3.03 billion kilowatt-hours of electricity, 100000 tons of aluminum processing and 13 million tons of railway freight in 2019.

There is room for the growth of resources in Xinjiang, and the coal and power industry chain is further consolidated. The company has two coal resources in Xinjiang, namely 106coal mine (with a production capacity of 1.8 million tons) and Weizigou coal mine (with a production capacity of 2.4 million tons), of which Weizigou Coal Mine was approved by the State Energy Administration in January 2019. In terms of power sector, the company's 2 × 350MW cogeneration project has been basically completed, which will use coal gangue and other low calorific value coal for power generation, and the cost is expected to decrease significantly, improve the current loss state of power business, and further consolidate the advantages of the coal power industry chain.

Risk factors: product prices are greatly affected by the market; aluminum business continues to lose money.

Investment advice: considering that asset impairment will still depress performance release and losses in the non-coal sector, we downgrade the company's EPS forecast for 2019-2020 to 1.28 yuan for 0.92 (the original 1920-year EPS forecast for 1.68 pounds for 1.66 yuan) and give EPS forecast for 2020 to 1.54 yuan. The current price is 11.09 yuan, corresponding to the 1921 P/E12/9/7x. Give the company a target price of 13.81 yuan, corresponding to the 2019 P/B1x, maintaining a "buy" rating.