Q2 single-quarter return net profit increased significantly compared with the same period last year, and the decline in the reported performance was significantly narrower than that of Q1. In the first half of 2020, the company achieved operating income of 2.545 billion yuan, down 25.21% from the same period last year. The net profit returned to the mother was 133 million yuan, down 47.74% from the same period last year, but the rate of decline was significantly narrowed compared with the first quarter. The main factors for the year-on-year changes in performance in the first half of the year are as follows: coal prices fell by about 124 million yuan compared with the same period last year, second, financial expenses decreased by about 25 million yuan compared with the same period last year, and third, electricity generation decreased by about 242 million yuan compared with the same period last year. Fourth, the average price of electricity sold decreased by about 41 million yuan compared with the same period last year.

Q2 achieved revenue of 1.327 billion yuan in a single quarter, down only 1.94% from a year earlier (Q1 fell by 40.58% in a single quarter). Mainly due to the decline in coal prices compared with the same period last year, Q2 achieved a net profit of 102 million yuan in a single quarter, an increase of 210.5% over the same period last year (Q1 fell 86.05% in a single quarter).

Affected by the epidemic, electricity generation fell sharply in the first half of the year, but the Q2 growth rate in a single quarter has become positive. In the first half of the year, the economy of Hubei Province was seriously affected by the epidemic. The electricity consumption of the whole society decreased by 11.06% compared with the same period last year, and the electricity generation of the whole province decreased by 7.64% compared with the same period last year. The company's electric power and thermal business were negatively affected. In addition, Hubei entered the plum early this year, the precipitation during the Meiyu period was heavy, and the hydropower output increased significantly, affecting the power output of thermal power units. In the first half of the year, the company completed 6.682 billion kilowatt-hours of electricity generation, down 24.44% from the same period last year. Among them, Q1 fell by 40.68% year-on-year in the first quarter, and Q2 increased by 1.71% year on year.

The gross profit margin of electric power business decreased slightly, while that of thermal power business increased. In the first half of the year, the company achieved a gross profit margin of 13.18% for the electric power business, down 1.66% from the same period last year, and 0.15% for the thermal business, up 2.96% from the same period last year. The decline in gross profit margin of power business is mainly due to the decline in the average price of electricity generated and sold, while the increase in gross profit margin of thermal business is mainly due to the decline in fuel costs compared with the same period last year. In the first half of the year, the total unit price of comprehensive standard coal was 685.9 yuan / ton, down 8.18% from the same period last year.

Profit forecast: we expect the company's net profit from 2020 to 2022 to be 5.3,6.5 and 730 million yuan, with a corresponding price-to-earnings ratio of 8.3,6.8,6 times and a corresponding price-to-book ratio of 0.97,0.88,0.8 times.

Risk hints: macroeconomic fluctuations, lower-than-expected electricity demand, falling electricity prices, higher than expected coal prices