Event: Fengcheng Phase III project has been removed from the "blacklist" of joint punishment for breach of trust in production safety.

The company recently issued an announcement: in January 2019, the first Evaluation team of the Safety Commission Office of the State Council conducted an on-site evaluation of the rectification and rectification of the "11 / 24" accident, and the evaluation team gave feedback on the relevant rectification opinions according to the inspection and evaluation of the company and Fengcheng Phase III Power Plant. On March 18, 2019, the Ministry of Emergency Management of the people's Republic of China issued the announcement of the Ministry of Emergency Management of the people's Republic of China (No. 6 of 2019), and the company's Fengcheng Phase III Power Plant has been removed from the "blacklist" of joint punishment for production safety and breach of trust.

Comments: the biggest obstacle to getting back to work may have been eliminated!

The third phase expansion project of Jiangxi Fengcheng Power Plant is a key project of electric power construction in Jiangxi Province, which is invested by the company to build 2 × 1000MW ultra-supercritical, secondary intermediate reheat, condensing coal-fired generating units.

Affected by the "November 24" safety accident, the project was suspended on November 24, 2016, and in October 2017, the project was put on the suspension list by the relevant state departments because of incomplete formalities.

Since the "11-24" accident, the company has always regarded the resumption of the third phase of Fengdian as a top priority. The company deeply reflects on the lessons of the accident, pay close attention to safety in production, thoroughly investigate and eliminate all kinds of hidden dangers, plug safety loopholes, and further promote the special rectification and reform of accidents. The company has repeatedly reported the progress of the work to the provincial party committee and provincial government, the Huazhong Energy Administration, the provincial emergency management department and the provincial departments directly in charge, and done a good job in the closed-loop work of "11 / 24" accident rectification. At the same time, the company makes every effort to do a good job in the preparatory work before returning to work, and conscientiously carry out the procedures for the construction of the project. At present, 48 of the 49 supporting documents for resumption of work have been completed, and only one (construction permit for smoke tower construction) is being processed.

We believe that the fact that the Fengcheng Phase III project has been removed from the "blacklist" of joint punishment for breach of trust in production safety is a positive evaluation of the company's rectification and reform by the safety regulatory authorities after the evaluation at the beginning of the year, which means that the company's rectification and reform work has been basically recognized, at least in major aspects and key issues. As for the resumption of the project, we believe that the biggest obstacle may have been removed through the company's efforts.

In recent years, the demand for electricity in Jiangxi Province has increased rapidly, with an increase of 10.4% in 18 years. The supply and demand of power in the province is tight, and the number of hours of utilization of thermal power units in the province in the past 18 years is 5197 hours, ranking first in the country. From January to February 1919, electricity consumption in Jiangxi Province increased by 7.21% (2.75 percentage points more than the national level), and thermal power utilization hours were 835 hours (105 hours more than the national level). We believe that the current external environment of power consumption in Jiangxi Province is also conducive to the early resumption of the project to alleviate the tight supply and demand situation.

Profit forecast

We estimate that the operating income of the company from 2018 to 2020 is 25.25,26.85 and 2.748 billion yuan respectively, and the return net profit is 2.04,2.54 and 267 million yuan respectively, and the corresponding EPS is 0.21,0.26,0.27 yuan per share. Maintain the target price of 7.26 yuan and maintain the "buy" rating.

In addition, according to the annual utilization hours of 4800 hours and the coal price of 840 yuan per ton, we estimate that if the third phase of Fengcheng Power Plant is fully put into operation, the company's net profit will be increased by about 350 million yuan.

Risk hint: the resumption of the project is less than expected, the electricity demand in Jiangxi Province is declining, and the coal price is high.