The overall profit of the power listing platform under Jinkong Group has been growing steadily. Tongbao Energy is one of the three major listed platforms under Jinkong Group. Currently, it has wholly-owned subsidiaries, Shanxi Sunshine Power Generation and Shanxi Local Power, and also has a stake in Yushupo Coal Industry in Ningwu, Shanxi (23%), forming the three main industries of power distribution, power generation, and coal. In 2022, the company achieved revenue of 11.118 billion yuan (YOY +41.98%) and net profit of 854 million yuan (YOY +358.98%), mainly due to a sharp rise in volume and price in the power generation sector, an increase in electricity sales in the distribution sector, and an increase in the profitability of participating coal companies. 2023Q1-3 achieved revenue of 8.093 billion yuan (YOY -1.13%) and net profit of 539 million yuan (YOY -24.27%), mainly due to lower trading electricity prices combined with lower transmission and distribution prices.

Position Jinkong Group's clean energy capital operation platform to accelerate the expansion of clean energy business. In order to accelerate high-quality development, the company was originally positioned as the capital operation listing platform for the Jin Kong Equipment Manufacturing Group, and intended to inject merit into Ronde Company, but high-end equipment manufacturing is still in its infancy, and it is difficult to inject into the company in the short term. Therefore, the company's strategic positioning was promptly adjusted to the capital operation listing platform for Jin Kong Group's clean energy, terminated the acquisition of equipment assets, and completed the company's business scope adjustments and supporting amendments to the company's articles of association by the end of 2022. The company is actively expanding the clean energy business and comprehensively planning the securitization of the Group's clean energy assets. Currently, the new 150MW hybrid photovoltaic power generation project in Wanrong and the 150MW terrestrial photovoltaic project in Yuanping have obtained government filing documents and are currently carrying out approval procedures such as state-owned capital approval. At the same time, Jinneng Group has about 6 million kilowatts of assets in operation in the clean energy sector, mainly photovoltaic power assets in Shanxi Province.

With Jinkong Group to invest in the construction of a new energy base, the company's strategic transformation has ushered in significant progress. On October 20, 2023, the company announced that it will jointly fund the establishment of Jinneng Holding Jinbei Energy Co., Ltd., of which Jinkong Group will invest 2 billion yuan, and the company will invest 1 billion yuan to invest in the construction of a new energy base in the Jinbei coal mining subsidence area. It will build a new energy supply and consumption system in the Jinbei region based on large-scale wind and photovoltaic bases, supported by clean, efficient and advanced coal power, and stable, safe and reliable UHV transmission and transformation lines as carriers. It plans to focus on building 6 million new energy, 4 million kilowatts of supporting coal power, and 1.1 million kilowatts of supporting energy storage The starting point of the kilowatt, Datong-Huailai-Tianjin North-Tianjin-South UHV AC transmission channel, the establishment of this joint venture marks an important step in the company's transition to clean energy.

Profit forecast: maintain the “buy” rating. We expect the company to achieve operating income of 112.22/125.59/13.562 billion yuan and net profit of 88/9.39/999 billion yuan in 2023-2025, corresponding to PE of 14.58x/13.78x/12.95x, respectively.

Risk warning: changes in the macroeconomic situation at home and abroad have exceeded expectations, the company's power generation and distribution business revenue has fallen short of expectations, changes in coal investment income have exceeded expectations, the clean energy industry injection process has fallen short of expectations, profit forecasts and valuation models have fallen short of expectations, etc.