Summary of events: on October 25, the company released a report on the third quarter of 2023, with operating income of 24.933 billion yuan in the first three quarters, an increase of 2.2% over the same period last year; net profit of 1.963 billion yuan, an increase of 221.8%; and net profit of 1.873 billion yuan, an increase of 247.8% over the same period last year. In the third quarter, the company realized operating income of 9.645 billion yuan, an increase of 1.7% over the same period last year; the net profit of returning to its mother was 845 million yuan, turning losses into profits over the same period last year; and deducting 870 million yuan of non-return net profits, turning losses into profits over the same period last year.

Coal prices are declining, thermal power performance continues to repair, and new units are put into production. Q4 performance: we estimate that the average closing price of Q3 Qinhuangdao Port Q5500 power terminal coal is 866 yuan / ton, down 31.5% from the same period last year and 5.3% from the previous year; if coal prices are considered in terms of June, July and August, the average closing price of Q5500 power coal in Qinhuangdao Port is 825 yuan / ton, down 31.3% from the same period last year. Q3 (excluding financial business) gross profit margin 13.7%, year-on-year increase of 17.4%, month-on-month increase of 4.7%, spot coal prices decline and thermal coal procurement structure optimization, thermal power performance is continuing to improve. On September 26, the company announced that the 1 million kilowatt secondary reheat ultra-supercritical coal-fired generating unit under construction in Sheyanggang Power Plant, a subsidiary of the company, was officially put into operation. The company installed 8.885 million kilowatts of coal power in Jiangsu, and the commissioning of the new unit will boost the release of Q4 performance.

Investment income is a drag on Q3 performance: investment income is the core profit source of the company's financial sector. Q3 company realized net investment income of 363 million yuan, down 54 million yuan from the same period last year, down 13.0%, 404 million yuan from the previous month, and 52.6% from the previous month. Taking into account the equity expansion brought about by the convertible debt-to-equity swap of the Bank of Jiangsu, we estimate that the shareholding ratio of Jiangsu Trust has dropped to 6.50%, and the change in the shareholding ratio or the fluctuation of investment income is the main reason.

Investment advice: throughout the year, with the decline in spot coal prices and the optimization of the company's thermal coal procurement structure, thermal power performance continues to improve; quarterly fluctuations in the financial sector do not affect the stability of long-term performance. According to the changes of fuel cost and shareholding ratio of Bank of Jiangsu, the profit forecast of the company is adjusted. It is estimated that the annual EPS of the company on 23-24-25 will be 0.64 PE 0.74 PE (the previous value is 0.58 shock 0.69 shock 0.84 yuan), corresponding to the closing price of October 25, 2023, which is 10.5 shock 9.1 PE 7.4 times, with reference to the average valuation level of comparable companies in the industry. The target price is 8.96 yuan, maintaining the "cautious recommendation" rating.

Risk tips: 1) upward fuel cost; 2) insufficient consumption of electricity; 3) delay in the release of subsidies.