Event: The company released its 2019 three-quarter report. In the first three quarters, the company achieved operating income of 5.506 billion yuan, an increase of 16.52% over the previous year, and realized net profit of 495 million yuan, an increase of 191.7% over the previous year, in line with Shenwan Hongyuan's expectations. Key investment points: Power generation in the third quarter reached the best level in the same period in history, driving net profit to maintain rapid growth. The third quarter was the peak electricity consumption period in Hubei. The company completed a total of 5,574 billion kilowatts of electricity generation and 5.22 billion kilowatts of feed-in electricity, up 14.73% and 14.82% respectively over the previous year. While electricity consumption in Hubei Province has maintained strong growth, local hydropower output has declined significantly. Thermal power units play a load support role to ensure increased supply and generation, and the use of thermal power in the province has reached a new high level in recent years. The increase in power generation led to the company's revenue of 5.506 billion yuan in the first three quarters, an increase of 16.52% over the previous year. The electricity and coal price index in Hubei Province fell about 7% year on year in the first three quarters. Increased utilization efficiency of generator sets, combined with falling coal prices, drove the company's net profit to increase by 191.7% year on year. The Haoji Railway was successfully opened to traffic, and it is expected that the elasticity of coal price performance will be further unleashed. Central China is the region where thermal power companies have suffered the most damage since supply-side coal reforms. The high prices of electricity and coal are mainly due to poor transportation, the limited capacity of the National Railway, and the proportion of transportation from the sea to the river is rising year by year. After the Haoji Railway is put into operation in October this year, it will reshape the pattern of coal supply and demand in central China. The tiered freight rate north of Gangneung (including Gangneung) is 0.2024 yuan/ton/kilometer. According to estimates, if Haijinjiang coal is replaced by a ratio of 60%, the company's comprehensive coal price is expected to drop by 20 to 30 yuan/ton. We judge that as the scale of transportation increases, the segmented freight rate of the Haoji Railway is expected to gradually drop. The company belongs to the same National Energy Group as Shenhua Group. Its power plant is close to the Haoji Railway, so it is expected that it will be the first to enjoy the dividends brought by lower freight rates. The emerging manufacturing industry is driving the demand for electricity in Hubei to maintain a high growth rate, and the number of hours used by the company is expected to continue to rise. In January-September, the electricity consumption growth rate in Hubei Province was 7.92%, higher than the national average of 3.52 percentage points. Benefiting from the increase in electricity demand and the decline in hydropower generation, the average utilization time of thermal power units in Hubei Province from January to September was 3,624 hours, an increase of 300h over the previous year. We believe that Hubei Province has taken advantage of the rapid development of the manufacturing industry to maintain a high growth rate of electricity demand. The capacity of new generators is limited, and the power generation efficiency of existing units is expected to continue to rise. Profit forecast and valuation: Referring to the results of the three quarterly reports, we maintain the company's net profit forecasts for 2019-2021 at 653, 8.72, and 941 million yuan. The current stock price corresponding to PE is 8, 6, and 6 times, respectively. The company is the most definitive target for Haoji Railway to commence production. The high electricity consumption growth rate in Hubei Province is expected to drive the unit's power generation efficiency to continue to improve and maintain the “buy” rating.