Event Overview The company released its 2019 annual report. During the reporting period, it achieved operating income of 18.438 billion yuan, an increase of 27.13% over the previous year; realized net profit of 1,362 billion yuan, an increase of 54.75% over the previous year, and EPS of 0.2 yuan/share. Analysis and judgment: Volume and price have risen sharply, and revenue has increased steadily. In 2019, the company continued to be deeply involved in thermal power generation. The company's Xilin Power Generation and Shiyan Thermal Power were put into commercial operation one after another, and the installed capacity scale of the company's holdings and operations was further expanded. By the end of the year, the company controlled an installed capacity of 14.24 million kilowatts, an increase of 2.37 million kilowatts over the beginning of the year, an increase of 19.97%; the total equity capacity was 16.516 million kilowatts, an increase of 1.709 million kilowatts over the beginning of the year, an increase of 11.54%. At the same time, the average number of hours used by the company's generator sets was 4893 hours, which is higher than the national average utilization time of thermal power of 600 hours. The scale of power generation increased, and the number of hours used was stable. The company's annual power generation capacity was 69.422 billion kilowatt-hours, an increase of 23.22% over the previous year. In 2019, the average feed-in electricity price (excluding tax) of power generation companies controlled by the company was 269.04 yuan/MWH, an increase of 5.92% over the previous year. Volume and price increased sharply, ensuring the steady growth of the company's performance. While vigorously developing thermal power, the company is actively increasing its heating market layout. In 2019, it sold a total of 457.14,200 gigajoules of heat, an increase of 17.43% over the previous year, achieving a heating area of 137 million cubic meters, an increase of 35.5 million square meters over the previous year, and a cumulative increase of 266 million yuan in heating revenue. Under the resonance of thermal power and heating, the company achieved revenue of 18.438 billion yuan, an increase of 27.13% over the previous year. In 2019, fuel costs fell slightly, and profits increased dramatically. The company controlled 15 power generation operators, with a total of 32 generator sets. 90% of the units and capacity were distributed in China's coal-rich provinces and regions. In 2019, the price of thermal coal on the cost side of thermal power showed a downward trend. On December 31, the liquidation price of thermal coal (Q5500) was 551 yuan/ton, a year-on-year decrease of 26 yuan/ton. However, since most of the company's power plants are located in coal-producing regions, the decline was not significant or instead rose. Take the Inner Mongolia region with the largest distribution of the company's units as an example. Regional electricity is tight. In 2019, the average settlement price of thermal coal in the region was 215.05 yuan/ton, up 2.38% from 2018 (hereinafter referred to as the same period). In this context, by strengthening strategic cooperation with large coal companies, increasing the proportion of long-term coal contracts, expanding the sources of coal suppliers in the market, implementing online bidding and sunshine procurement for market coal, etc., the company actively researched thermal coal futures market trends, implemented mispeak procurement, increased heating season inventories ahead of schedule, and scientifically carried out low-quality coal blending. The unit price of coal entering the factory in 2019 was 403.07 yuan/ton, a year-on-year decrease of 0.61%, and the cost side was effectively controlled. The company achieved a gross profit margin of 17.21%, a year-on-year increase of 6.10pct. The total unit price of imported coal in the first quarter of 2020 was 427.14 yuan/ton, a cumulative increase of 5.17% over the same period last year. It is expected that coal prices will continue to decline in 2020. At that time, the company is expected to continue to benefit from it, reduce power generation costs, and increase profit margins. In 2020, the company still has several investment units to be invested. It is optimistic that the company will steadily develop the company's Xilin power generation project in 2019 and the Shiyan thermal power project will be put into operation one after another, further expanding the company's production capacity scale. In 2020, the company is steadily advancing new projects. It is expected that Jingxin Power Generation, Lu Lin Power, Qinhuangdao Thermal Power, and Yichun Thermal Power will be put into operation one after another, and Jingtai Power Phase II will also commence construction simultaneously. The company's power generation scale will continue to grow in the next few years. While consolidating endogenous growth, the company will further increase its market share and strengthen its market competitiveness through mergers and acquisitions. During the reporting period, the company completed the acquisition of 100% of the shares of Henan Nanjing Coal Huazhou Thermal Power Co., Ltd., 100% of the shares of Jiangxi Yichun Jingmei Thermal Power Co., Ltd., and 51% of the shares of Inner Mongolia Jinghai Coal and Gangue Power Generation Co., Ltd. At the same time, in order to ease the financial pressure brought about by rapid expansion, the company successfully issued 1.1 billion yuan of corporate bonds in 2019, supplementing the company's working capital. In 2019, in addition to business progress, the company also made major breakthroughs at the management level. For the first time, the company announced an equity incentive plan and granted stock options to 174 incentive recipients. The announcement of the incentive plan further stimulates management vitality and forms healthy competition among management. Under the leadership of excellent management, we continue to be optimistic about the company's internal expansion and sustainable development. Investment recommendations In the first quarter of 2020, the company achieved a power generation capacity of 17.068 billion kilowatt-hours, a year-on-year increase of 7.82%; completed feed-in power of 15.705 billion kilowatt-hours, a year-on-year increase of 8.14%. Under the influence of the epidemic, demand from various regions has weakened, and the company is still able to maintain growth in power generation. In 2020, the company put several units into operation, and the scale of power generation has further increased. At the same time, fuel costs are expected to drop in 2020, which can hedge against falling coal-fired feed-in tariffs. According to the company's profit situation in 2019, we lowered the company's profit forecast for 2020-2021 and increased the profit forecast for 2022. The estimated revenue of the company in 2020-22 is 19.047 billion yuan/22.49 billion yuan/23.304 billion yuan, respectively, with a year-on-year growth rate of 8.2%/11.5%/4.7%, respectively. Net profit was 1,857 million yuan/2,086 million yuan/2,350 million yuan, respectively. The year-on-year growth rate was 36.6%/12.4%/12.6%, respectively, and the EPS was 0.28/0.31/0.35 yuan, respectively, maintaining the “increase in holdings” rating. Risk warning 1) The epidemic has affected the macroeconomic downturn, and social electricity demand has declined sharply; 2) feed-in tariffs have continued to decline, and coal prices have fallen short of expectations; 3) The construction progress of major key projects has fallen short of expectations, and the production capacity of the commissioned projects has fallen short of expectations.