Incident Changyuan Electric Power released 2019 performance forecast Changyuan Electric Power released its 2019 performance forecast. The company expects net profit to be 552 million to 614 million yuan for the full year of 2019, an increase of 164.51% to 194.22% over the previous year. Brief review: Electricity consumption declined slightly in the fourth quarter. Overall power generation benefited from the concentration of thermal power units of Hubei Thermal Power High Growth Company in Hubei Province, and profitability was greatly affected by the regional electricity and coal supply and demand situation. The company completed feed-in power of 4.182 billion kilowatt-hours in the fourth quarter, a slight decrease of 4.19% year on year. However, thanks to the continuous improvement in electricity demand in Hubei Province in the first three quarters and a sharp drop in hydropower output in the province, the company completed 17.715 billion kilowatt-hours of feed-in electricity throughout the year, with a year-on-year growth rate of 10.4%. The number of thermal power utilization hours in Hubei Province from January to November 2019 was 4,291, with a year-on-year growth rate of 6.6%. The improvement in the company's fleet utilization rate was better than the provincial average. Furthermore, due to the continued decline in coal prices in the market, the electricity and coal price index in Hubei Province from January to November 2019 was 599.05 yuan/ton, down 45.81 yuan/ton from the previous year. Combined with the reduction in the value-added tax rate, the price of electricity without tax for thermal power increased, and the profit situation of the company's thermal power business continued to improve. The bankruptcy of the Henan coal industry brought about irregular losses. It has been reflected in the 2019 results that Henan Coal, a subsidiary holding 75% of the company's shares, went bankrupt and liquidated due to serious insolvency. On December 26, 2019, Henan Coal Industry officially handed over to the bankruptcy administrator, and its asset impairment losses were included in the 2019 consolidated income statement of the company. Taking into account three factors such as accounting for the Henan coal industry's losses in 2019, the transfer of cumulative losses, and confirmation of all debt losses, the company expects the bankruptcy of the Henan coal industry to reduce the company's net profit to mother by 74 million yuan. We believe that the impact of this non-recurring loss is relatively limited and will not change the long-term value of the company. The opening of the Haoji Railway is expected to improve the coal supply situation in Hubei. On September 28, the official opening of the Haoji Railway marks the official opening of a new strategic channel for the country's coal transportation from north to south. It will completely change the situation in the past where China's coal resources can only be reached in central China and south China by sea and river transportation. Although the initial freight rate of the Haoji Railway was slightly higher than previously anticipated, we estimate that it still has a certain economic advantage and time advantage over sea entry into the river. We believe that with the gradual increase in the capacity of the Haoji Railway, its freight rate level may be adjusted dynamically in the future. The coal supply situation in Hubei is expected to be further improved, and the company's performance flexibility will gradually be released. Maintaining Changyuan Electric Power's “buy” rating previously, the market expected that the “benchmark+floating electricity price mechanism” would have a major negative impact on the company's performance, and the sentiment was rather pessimistic. According to our estimates, even considering that the electricity price of the company's units exceeding the benchmark electricity price fell to the benchmark electricity price, compounded by market-based concessions, the company's comprehensive electricity price drop was about 1.8 points. We determined that in 2020, coal prices in the Hubei market fell by about 50 yuan, which basically offset the impact of the decline in electricity prices, and the company's gross margin of thermal power is expected to remain at the level of 2019. Considering that the company's thermal power utilization hours in 2020 may not continue to be at the current high level, but the adverse factors of asset impairment have been eliminated, we expect the company's performance to continue to improve in 2020. We expect the company's revenue from 2019 to 2021 to be 7.344 billion yuan, 6.703 billion yuan, and 6.765 billion yuan respectively, and net profit to mother will be 589 million yuan, 620 million yuan, and 777 million yuan respectively, corresponding EPS of 0.53, 0.56 and 0.70 yuan, respectively, maintaining a “buy” rating.