2023Q2 achieved revenue of 2,798 million yuan, +15.43% year on year, -1.96% month on month; net profit of 476 million yuan, +119.35% year on year, +28.31% month on month; net profit of 119 million yuan after deducting non-return net profit of 119 million yuan, +561.11% year on year, +13.33% month on month. The company's overall operating performance in the second quarter was in line with expectations, and the return profit exceeded expectations. Looking ahead to this year, the company's main business profits have begun to recover, the digital energy business and computing power business strategies are becoming more and more clear, and the “buy” rating is maintained.

Cost factors have improved, and profits have increased from asset sales. In the first half of the year, the company achieved revenue of 5.627 billion yuan, +11.87%; net profit of 801 million yuan, +106.88% of the same period; net profit of 223 million yuan after deducting non-return net profit of 223 million yuan, +91.25% year-on-year. Among them, 2023Q2 achieved revenue of 2,798 million yuan, +15.43% year on year, -1.96% month on month; net profit of 476 million yuan, +119.35% year on year, +28.31% month on month; net profit of 119 million yuan after deducting non-return net profit of 119 million yuan, +561.11% year on year, +13.33% month on month. The company's revenue resumed growth in the first half of the year, mainly benefiting from lower costs of coal, natural gas, etc., and the company's cogeneration resumed normal production. The company's return profit exceeded expectations in the first half of the year. In addition to returning to normal profits from the main business, it also simultaneously benefited from investment income obtained from the sale of multiple power plant assets.

Clean energy shipments have gradually recovered, and the digital energy business has been transformed and upgraded. In terms of the clean energy business, by the end of the first half of the year, the total installed capacity of the company's grid-connected operation was 2903 MW, of which 1,77MW was cogeneration from combustion engines, 744MW of wind power, 116 MW of waste-to-energy generation, and 266 MW of coal-fired cogeneration. Looking at the first half of the year alone, the company settled 6.777 million tons of steam, -4.66% year-on-year; settled electricity volume of 4.90 billion kilowatt-hours, +0.12% year-on-year; and completed garbage disposal volume of 1.107 million tons, an increase of +8.65% over the previous year. In terms of the digital energy business, the company upgraded its original mobile charging and switching business to enable the “fixed+mobile” new power system service business with the “optical storage, charging and sale” integration. In the first half of the year, it had cooperated with Geely, Futian, Ningde, etc., and had adjusted cash flow from various projects. As of the first half of the year, 81 passenger vehicle integrated energy stations had been operated and under construction, and 49 commercial vehicles were in operation and under construction, for a total of 130. In terms of computing power, the company plans to invest 5 billion dollars to build 15 computing power centers within 2 years. Currently, the first project, the Suzhou Xiangcheng project, is progressing smoothly, and is cooperating with Suzhou to build and launch the first energy computing power center in China to enhance the core competitiveness of “electricity+computing power”.

Profits in the main business have begun to recover, and the financial expenses control effect is good. The company's overall gross margin in the first half of the year was 17.81%, +0.14pct. Of these, the gross margin for the second quarter was 18.8%, year-on-year/month-on-month +2.1/2.1pcts, mainly due to a decrease in raw material costs for cogeneration. In the first half of the year, the company's sales expense rate, management cost rate, R&D expense rate, and financial expense ratio were 1.1%/5.9%/0.2%/5.6%, respectively, compared to +0.4/+1.4/+0.0/-3.0 pcts. Among them, the financial expense ratio decreased a lot, mainly due to adjustments in the financing structure and channels. The company's net interest rate for the first half of the year was 14.2%, +6.5 pcts year on year, 4.0% after deducting non-net interest rate, +1.6 pcts year on year.

Risk factors: National promotion of electricity exchange did not meet expectations; cogeneration construction did not meet expectations; rising natural gas costs, etc.

Profit forecast, valuation and rating: Considering that the average profit exceeded expectations in the interim report, we raised the company's 2023-2025 EPS forecast to 0.77/0.90/1.05 yuan (the original forecast was 0.67/0.83/0.95 yuan). The current stock price corresponds to 16/13/11 times PE in 2023-2025, respectively. The company started with cogeneration of heat and power, and together with its parent company, is a leading domestic private energy enterprise. The traditional main business is steady, the power exchange business has strong resource endowments, and a clear business strategy focus. It is expected that priority will be given to the increase in holdings in the domestic power exchange industry. Referring to the PE valuation situation of comparable companies such as Teruide and Hanchuan Intelligence in 2023 (Wind unanimously expected), considering that the company's power exchange growth is high but its original main business is mature, 25 times PE in 2023 is given, corresponding to a target price of 19 yuan, maintaining a “buy” rating.