In 2008, the company achieved operating income of 3.235 billion yuan, down 10.97% from the same period last year; operating profit was-1.049 billion yuan, down 1332.94% from the same period last year; net profit belonging to the owner of the parent company was-1.062 billion yuan, down 2254.26% from the same period last year; EPS-1.49 yuan.

In the first quarter of 2009, the company achieved operating income of 731 million yuan, down 22.07% from the same period last year; the net profit belonging to the owner of the parent company was-152 million yuan, down 29.99% from the same period last year; and the operating profit was-154 million yuan, down 30.51% from the same period last year.

In 2009, the utilization number of hours showed a trend of low before and high after. In 2008, affected by the decline in demand, the growth of new units and the squeeze of hydropower, the company completed 9.2 billion kilowatt-hours of electricity generation and 8.479 billion kilowatt-hours of electricity, respectively, a decrease of 19.14% and 18.46% compared with the same period last year. Although the company's electricity generation continued to decline sharply in the first quarter of 2009, we believe that the number of hours used by the company for the whole year will show a trend of low before and high after when the economy improves.

Profitability is expected to pick up sharply in 2009. The factor of coal price has an important impact on the company's profitability. Affected by the rise in coal prices, in 2008, the fuel cost of the company's power business increased by 8.74% to 2.158 billion yuan compared with the same period last year, and the unit cost of power supply fuel increased by 35.02% year-on-year to 264.39 yuan per megawatt hour, resulting in a 36.71% year-on-year decline in gross profit margin of the power business to-34.59%. In the first quarter of 2009, the company's fuel cost was distorted because the contract coal had not yet been signed, with a gross profit margin of-0.06%. With the signing of the contract coal price, we believe that the distortion of the company's fuel cost will be corrected. In 2009, benefiting from the decline in market coal prices, a sharp drop in sea freight charges and a reduction in coal consumption, we expect the company's unit cost of power supply fuel to be reduced, and profitability is expected to pick up significantly under the full effect of electricity price increases.

Investment hotspots worthy of attention. 1. Coal and electricity joint venture. Up to now, the annual equity production capacity of the coal power joint venture project that the company intends to develop and under development has reached 4.09 million tons, accounting for about 60% of the company's current annual coal consumption, which helps to improve the risk of coal price fluctuations. 2. Asset injection. The company is the only asset integration platform for Datang in Hunan. According to the promise of share reform, Datang Group will gradually inject other Hunan power assets into Huayin Power within three years from 2007 to 2009. This commitment has not yet been fulfilled, which will mean that Datang Group is likely to inject assets into the company in 2009 in accordance with the commitment of share reform. 3. The concept of venture capital. The company controls and participates in some high-tech companies and venture capital concept companies. In the case of increasing market expectations for the launch of the gem, the venture capital concept helps to enhance the company's market attention. 4. The concept of shareholding brokerage. The company holds 0.49% of Haitong's shares. In the case of a warmer market, we think that the company's Haitong market value will gradually pick up. 5. The company has the concept of nuclear power. On August 1, 2007, the company signed the Memorandum of understanding of Hunan Datang Huayin Nuclear Power Project with Datang Group and EDF to jointly discuss and promote the development of Datang nuclear power project.

Valuation and investment advice. Out of caution, we conservatively lowered the company's EPS of 2009 and 2010 to-0.06 yuan and-0.09 yuan. As the company's recent share price has reached our previous expectations, we temporarily downgraded the company to "neutral". However, investors are invited to pay attention to the relevant investment opportunities mentioned above, and we will keep track of the company.

Risk tips: 1, the risk of demand decline; 2, the risk of rising coal prices.