Incident: The company announced its 2022 annual report, achieving revenue of 11.093 billion yuan, an increase of 9.00%; the net profit of the mother was 476 million yuan, an increase of -44.95%; after deduction, an increase of -47.46%. The performance was in line with expectations.

The performance was in line with expectations, and the pain of transformation coexisted with the highlights of the new business. According to the company's annual report, 2022 achieved revenue of 11.093 billion yuan, an increase of 9.00%; net profit of the mother was 476 million yuan, an increase of -44.95%; after deduction, it was 389 million yuan, an increase of -47.46%. The performance was in line with expectations. From this annual report, we can see that in the process of steadfastly implementing the “14th Five-Year Plan” strategic development plan and developing new integrated energy, new energy, and market-based electricity sales businesses, the pain of transformation and the highlights of the new business coexisted:

1) Electrolytic manganese: Production in 2022 was 37,500 tons, a year-on-year decline of 47.77%, mainly due to the shutdown of the Chongqing manganese industry in the second half of 2021 and the year-on-year reduction in electrolytic manganese production by the Guizhou manganese industry; sales volume was 61,800 tons, down 48.14% from the previous year, mainly due to falling demand in the electrolytic manganese market. Meanwhile, compensation was received 59 million yuan due to the policy shutdown of Chongqing's manganese industry.

2) Changes in fair value: In 2022, it was -176 million yuan, a year-on-year decrease of 55.16%, due to a decline in the fair value of the shares of the listed company Fuling Electric Power held by the company.

3) Investment income: 175 million yuan in 2022, of which the investment income of Qianyuan Electric Power was confirmed was 41 million yuan, the carbon investment income of Chibi Great Wall was confirmed was 21 million yuan, the investment income of Chongqing Tiantai Energy was confirmed 18 million yuan, etc.; the sale of Fuling Electric Power's shares included 43 million yuan, the investment income of transactional financial assets was 10 million yuan, etc.

4) Other income: In 2022, it was 83 million yuan. It was mainly self-deferred revenue transferred to current income, such as government subsidies for agricultural network loan repayment, relocation compensation for immigrants, and subsidies for the efficiency expansion and renovation of small utilities in rural areas.

5) Electricity business: Power generation in 2022 was 2,029 billion kilowatts, down 27.04% from the previous year, mainly due to the depletion of incoming water from the watersheds to which the company's own hydropower plants belong; electricity sales were 13.572 billion kilowatts, an increase of 2.68% over the previous year, mainly due to the development of new users and the increase in electricity consumption of existing customers. The power business achieved operating profit of 364 million yuan, a year-on-year decline of 28.91%.

6) Integrated energy services: turning a loss into a profit, achieving operating profit of 51 million yuan in 2022, mainly the successful commissioning of the Jiulongyuan cogeneration project in Wanzhou Economic Development Zone to achieve profit.

7) Market-based electricity sales: Changxing Electric Power, a wholly-owned subsidiary, completed market-based electricity sales settlement with market access qualifications in different regions in 2022, a year-on-year increase of 1414%; the wholly-owned subsidiary Changdian Energy completed market-based electricity sales settlement in 2022 of 1,641 million kilowatts of electricity, up 8377% year on year; joint venture Chongqing Liangjiang Power Supply Co., Ltd. (Changxing Electric Power, a wholly-owned subsidiary of the company, holds 50% of its shares) completed market-based electricity sales settlement in 2022, a year-on-year decrease of 31%; the company's participating companies completed market-based electricity sales settlement in 2022 Guangdong Xinjuneng Energy Technology Co., Ltd. completed market-based electricity sales settlement in 2022 of 1,582 million kilowatts of electricity, down 18% from the previous year; the company's 17.51% shareholding company, Sichuan Smart Network, completed market-based electricity sales settlement in 2022 of 16.910 billion kilowatts of electricity, an increase of 38% over the previous year.

Strategic plans and business maps are becoming more and more clear, and growth is more certain. The company's business layout is gradually becoming clear:

1) Traditional electricity distribution business: As of the end of 2022, the total capacity of the company's own and controlled water motor assembly machines was 746.2 MW, of which the installed capacity of the unit connected to the company's own power grid was 713.3 MW, and the installed capacity of the unit not connected to the company's own power grid was 32.9 MW (Yunnan Mangya River Hydropower Station 24.9 MW, Wuxi County Xiamenkou Hydropower Station 8 MW).

2) Integrated energy service business: The company invested 1.11 billion yuan in the Jiulongyuan cogeneration project in the Wanzhou Economic Development Zone was completed and put into operation; the Chongqing Liangjiang Longxing Ganfeng Energy Station project with an investment of 660 million yuan has been approved. Currently, the EPC general contract bidding work has been completed; a joint venture for clean energy development has been set up with Angang Steel Group Co., Ltd.; actively promoted the user-side energy storage business in Guangdong and other places and achieved breakthroughs: Up to now, 84 user-side energy storage projects have been signed, with a total capacity of 863 MWH, and a total capacity of 1,333 projects. MWh; On the other hand, seizing the important opportunity of Chongqing to enhance the autonomous and controllable insurance and supply capacity of electricity and pilot the construction of independent energy storage power plants, investing a total of about 1,182 million yuan to promote the Songyi in Yongchuan District and Longsheng Independent Energy Storage Power Station projects in Liangjiang New Area; gradually exploring and clarifying the integrated business model and operation system for “charging, swapping and storage” of electric heavy trucks. Up to now, 19 decision projects have been completed, with a cumulative investment of nearly 500 million yuan.

3) Market-based electricity sales business: Adopting the “self-operated+joint venture” marketing model, the electricity sales scale ranked among the highest in the same industry in the country. In 2022, the company's holding and participating power sales companies signed more than 3,700 users, and the actual electricity settlement volume for the whole year was close to 28 billion kilowatts... Profit forecast and investment rating: We adjusted the company's 2023-2024 Gimu net profit of 885/1,018 million yuan (previous value was 1,22/1.39 billion yuan), adding 2025 Gimu's net profit of 1,144 billion yuan, corresponding to 2023-2025 EPS of 0.46 billion yuan , 0.53, and 0.60 yuan. The corresponding PE was 20/17/15 times respectively, maintaining the “buy” rating.

Risk warning: Under macroeconomic conditions, electricity demand in the terminal industry has weakened, incoming water fluctuates greatly, etc.