Key investment events: On October 29, the company released its 2019 three-quarter report. The company's operating income for the first three quarters of 2019 was 5.506 billion yuan, +16.52% year-on-year; net profit was 495 million yuan, +191.70% year-on-year. The company's 2019Q3 revenue was 2.103 billion yuan, +14.60% year-on-year; net profit was 240 million yuan, +65.01% year-on-year. Our comments on this are as follows: The increase in power generation combined with the fall in coal prices has driven a sharp increase in performance. There are three reasons for the sharp increase in the company's performance: 1) The sharp increase in power generation capacity: From January to September '19, the company completed power generation capacity of 14.418 billion kilowatts, +15.71% year-on-year. The main driving force behind the sharp increase in power generation was the strong demand for electricity in Hubei Province, where the company's units are located. From January to September '19, the electricity consumption in Hubei Province was 168.5 billion kilowatt-hours, +7.92% year-on-year, and the growth rate was far higher than the 4.4% increase in the electricity consumption of the whole society during the same period. At the same time, the trend in the supply and demand pattern of thermal power in Hubei Province is improving. From January to September '19, the average utilization time of thermal power equipment in Hubei was 3,626 hours, an increase of 300 hours over the previous year (+9.02%). During the same period, the country's thermal power equipment utilization hours were 3,174 hours, a year on year -101 hours (-3.08%). 2) The year-on-year decline in coal prices: From January to September '19, the average liquidation price of coal (Q5500) at Qinhuangdao Port was 598 yuan/ton, -8.32% year-on-year. The company's fuel/operating costs are about 60% (64% in '18), and performance is highly sensitive to coal prices. The fall in coal prices led to a sharp increase in the company's gross margin: the company's gross profit margin for the first three quarters was 17.65%, up 6.87pct year on year. 3) Feed-in tariffs rebounded year on year in the first half of the year: According to estimates, the company's 19H1 comprehensive feed-in tariff excluding tax was 0.370 yuan/kilowatt-hour, up 0.009 yuan/kilowatt-hour year on year. Market electricity is showing a convergence trend compared to benchmark electricity discounts. Market-based electricity prices have made thermal power profit expectations more stable. Since the introduction of electricity marketization, bidding has gradually become more rational, and market electricity prices have shown a convergence trend compared to benchmark electricity discounts. On October 24, the Development and Reform Commission issued the “Guiding Opinions on Deepening the Reform of the Feed-in Tariff Formation Mechanism for Coal-fired Power Generation”, changing the current coal-fired benchmark feed-in tariff mechanism to a market-based mechanism of “benchmark price+fluctuation up and down”. From a medium- to long-term perspective, the abolition of the benchmark electricity price and the change to the “benchmark price+fluctuation up and down” market-based mechanism does not unilaterally suppress electricity prices, but rather guarantees that electricity prices fluctuate within a reasonable range (no more than 10% increase, and the decline does not exceed 15% in principle). The future marketization of electricity prices will make thermal power profit expectations more stable. Fluctuations in coal prices dominate the thermal power sector, and it is expected that there will be downward pressure on coal prices in the medium to long term. Judging from the market recovery, rising thermal power prices are usually driven by falling coal prices. Looking at the medium to long term, the coal price trend is expected to decline in the context of “no housing speculation” combined with the tightening of real estate financing regulations. At the same time, coal prices are under pressure as coal production capacity is concentrated in high-quality production areas. Investment advice: Maintain a prudent increase in holdings rating. The company's thermal power unit is located in Hubei Province. The regional electricity consumption growth rate and thermal power supply and demand pattern are superior to that of the whole country, and the company's performance is expected to improve further under the downward trend in coal prices. We expect the company's net profit in 2019-2021 to be 617, 805, and 874 million yuan, with a year-on-year growth rate of 195.6%, 30.4%, and 8.7%, corresponding to the PE valuation of 8.8, 6.8, and 6.2 times on October 29, maintaining a “prudent increase in holdings” rating. Risk warning: risk of electricity price reduction, risk of hourly decline, risk of coal price fluctuations.