The company's 2023H1 realized a net profit of 2.779 billion yuan, an increase of 602.81% over the same period last year. The strong demand for electricity in Zhejiang Province has led to a high increase in the amount of thermal power, and the downward coal price has raised the gross profit margin, and it is expected that the performance of thermal power will continue to improve in the second half of the year; the expansion of foreign investment will lead to the continuous growth of investment income; the company has put into production and approved a total of 6 million kilowatt thermal power units, and the growth of thermal power is guaranteed. We raise our 2023-2025 net profit forecast to 75.5-98.3-pound 11.53 billion yuan, corresponding to the 2023-2025 EPS forecast of 0.56-0.73 pound 0.86 yuan respectively, and maintain the company's "buy" rating with a target price of 5.10 yuan.

2023H1 realized a net profit of 2.779 billion yuan, in line with expectations. In the first half of 2023, the company achieved operating income of 41.729 billion yuan, an increase of 16.16% over the same period last year, and a net profit of 2.779 billion yuan, an increase of 602.81% over the same period last year, corresponding to 0.21 yuan of EPS. From a quarterly point of view, 2023Q2 realized operating income of 17.649 billion yuan, a decrease of 3.64% over the same period last year, and a net profit of 1.011 billion yuan, an increase of 61.19%.

The growth of electricity is more prominent, and the price of electricity rises slightly-the downward cost helps to improve the gross profit margin significantly. According to the company announcement and CLP data, the warming of demand and the pressure of outbound hydropower supply led to an 8.9% year-on-year increase in thermal power generation in 2023H1 Zhejiang Province, of which the company completed 74.895 billion kilowatt-hours in the first half of the year, an increase of 11.34% over the same period last year, slightly better than the overall data of the province. The company's 2023H1 feed-in electricity price achieved a small increase of about 1%. Combined with the positive impact of the rapid decline in market coal prices and the relatively low proportion of coal in the company's long Association, the company's 2023H1 comprehensive gross profit margin rose 8.48 percentage points to 6.42%. In terms of period expenses, affected by the increase of Zhonglai shares in a non-co-controlled merger, the financial expense rate decreased by 0.38 percentage points to 1.40% compared with the same period last year, the management expense rate increased slightly by 0.06 percentage points to 2.08%, and the debt ratio increased by 8.48 percentage points to 47.73% over the same period last year, which is still at a low level.

Upgrade to the double main business of "thermal power + manufacturing", and participate in Cangnan to strengthen the layout of the nuclear power field. In terms of the main business of traditional thermal power, according to the company's announcement, Jiaxing Power Plant Phase IV and Taiwan No.2 Power Plant Phase II projects were approved, and Yueqing Power Plant Phase III achieved "double production" before the peak of the summer; the company completed the acquisition of Zhonglai shares and successfully merged in March this year, the acquisition of solar backplane leader helped the company successfully enter the field of high-end equipment manufacturing of new energy, and is transforming and upgrading to the dual main business of "thermal power generation + new energy manufacturing". The good operation of participating in nuclear power and the improvement in the profit of participating in coal power led to the company's investment income in the first half of the year continued to be bright. In the first half of the year, the company achieved a total investment income of 2.52 billion yuan, an increase of 19.20% over the same period last year, accounting for 71.34% of the total profit. According to the announcement of the company in March 2023, the company continues to strengthen its investment in the field of nuclear power, through an agreement to increase its stake in CGN Cangnan Nuclear Power, and holds a 34% stake in the project company upon completion.

Risk factors: the demand for electricity has dropped sharply; the price of coal is higher than expected; the power generation of the company is lower than expected; the electricity price of the company is lower than expected; the development of foreign investment enterprises is lower than expected.

Earnings forecast, valuation and rating: considering that the company's performance has been significantly repaired and coal prices have dropped significantly in the first half of 2023, the company is expected to benefit significantly, we adjust the cost assumption and increase the net profit forecast for 2023-2025 by 29% to 98.3 pesque 11.53 billion yuan (the original forecast was 54.2 pound 75.5 / 8.89 billion yuan). The corresponding EPS forecast for 2023 to 2025 is 0.56 Universe 0.73 Universe 0.86 yuan (the original prediction is 0.40 Universe 0.56 Universe 0.66).

It is expected that the company's thermal power business profits will return to a reasonable level in 2024, while the company as a local thermal power enterprise gives a certain valuation discount, with reference to comparable companies (Huadian International, Huaneng International, Guodian Power) 8 times the market consensus expected PE average value in 2024, giving the company 7 times the target PE in 2024, corresponding to the target price of 5.10 yuan, maintaining the "buy" rating.