Key points of investment:

Energy finance has two main businesses, industrial and financial collaboration: The company, formerly known as Suntian Shipbuilding, a subsidiary of Jiangsu Guoxin Group, the same controlling shareholder, solved the remaining debt problems through “bankruptcy restructuring+asset restructuring” and injected core assets into the company. The main business changed from shipbuilding to a dual main business of energy and trust. The company's main business includes two major sectors, energy and finance. The energy sector accounts for a relatively large share of assets; the financial sector contributes steadily to performance and is the main profit entity. In 2023, benefiting from falling coal prices, improving quality and efficiency, etc., the company's net profit to mother increased by 3014% year on year. 1Q-3Q24's net profit to mother reached 2.921 billion yuan, a year-on-year increase of 48.47%. It is expected that coal prices are unlikely to rise sharply in the future, overall comprehensive electricity prices are relatively stable, demand for electricity in Jiangsu is strong, and construction units will be put into operation one after another during the 14th Five-Year Plan period. The company's performance is expected to continue to grow, and the future can be expected.

The installed production of thermal power plants has grown rapidly, and it is time to set sail: as of 1H24, the company has put into operation 15.454 million kilowatts of thermal power, holds 5.08 million kilowatts of coal power under construction, and is participating in 1 million kilowatts of coal power under construction. Jianchen Holdings has 6.08 million kilowatts, which is the highest in the province. It is expected to be put into operation in 24-25, and will inject new impetus into growth after commissioning. The company's fleet layout is mainly based in Jiangsu. Jiangsu is a major electricity consuming province, and electricity demand is strong to ensure a high level of utilization hours of the company's units. Furthermore, the fleet layout along the coast has an innate cost advantage while maintaining high comprehensive electricity prices. According to the company's calculation of 12.862 million kilowatts of coal power plants in Jiangsu and Shanxi at the end of 2023, the company's electricity capacity cost (tax included) in 2024 was about 1.286 billion yuan. The price of electricity capacity is beneficial to the stability of the unit's profit. Sujin Energy, which the company has set up in Shanxi, is responsible for operating the “Yanhuai DC” supporting project. Over 90% of the electricity is delivered to Jiangsu. The electricity is guaranteed while enjoying the low price of Jinmei and the high price of Sujin Electric Power, which is quite profitable.

Finance has established a strong profit base, and performance positioning is the ballast stone: The company's financial sector is dominated by Jiangsu Trust. Jiangsu Trust is located in Nanjing and has obvious location advantages. It has maintained steady and high-quality development over the years, and its capital strength and brand popularity have steadily ranked first in Jiangsu. In 2023, Jiangsu Trust's revenue increased 21.26% year on year; total profit was 2.711 billion yuan, up 22.49% year on year, accounting for 78.24% of the company's total profit; net profit was 2.543 billion yuan, up 27.86% year on year. The financial sector is the ballast stone of the company's performance. Jiangsu Trust's investment income accounted for 68% of revenue in 2023, and is the main source of revenue.

The total return on investment in Bank of Jiangsu and LianLife Insurance in 2023 was 2.026 billion yuan, accounting for 74.8% of the total profit of Jiangsu Trust, which is the core source of profit. Jiangsu Trust is the largest shareholder of Bank of Jiangsu and Lian Life Insurance. Stable financial equity investment income has laid a strong foundation for the company to expand its business.

Profit forecast and investment advice: We forecast the company's revenue for 2024-2026 to be 351.85 billion yuan, 413.28 billion yuan, and 46.982 billion yuan, respectively, and net profit to mother of 29.90, 35.23, and 4,058 billion yuan, respectively, corresponding to PE 9.4/8.0/6.9 times, respectively. First coverage, giving a “buy” rating.

Risk warning: Risk of project commissioning falling short of expectations; policy risk; risk of high costs due to high fuel prices; risk of electricity market competition reducing feed-in tariffs; risk of financial sector profit risk; public data used in research reports may be delayed or not updated in a timely manner.