The company's net profit in the first three quarters was 830 million yuan, an increase of 77.9% over the same period last year, and its performance accelerated significantly, in line with the previous forecast. The high performance is mainly due to the positive heat supply of power generation, the continued decline in coal prices, and the substantial increase in investment income of the participating companies. Raise the company's home net profit forecast for 2020-22 to 1.01 billion yuan, 1.08 billion yuan, raise the target price to 7.8 yuan, and maintain the "buy" rating.
The first three quarters EPS 0.38 yuan, the performance is in line with the previous forecast. The company's cumulative revenue in the first three quarters was 9.9 billion yuan, down 2.8% from the same period last year, and its net profit was 830 million yuan, an increase of 77.9% over the same period last year, corresponding to EPS0.38 yuan, an increase of 18.8% over the same period last year. In the third quarter, the company achieved revenue of 3.28 billion yuan, an increase of 2.2% over the same period last year, and a net profit of 320 million yuan, an increase of 346.9% over the same period last year, corresponding to EPS0.18 yuan.
Electricity is repaired steadily and fuel cost is saved. In the third quarter, the company's operating revenue increased compared with the same period last year, reversing the trend of decline in the first half of the year. We believe that the main reason is that the growth rate of electricity generation of the company has become positive, and the heat supply continues to grow. Due to economic recovery and high temperatures, Hebei Province's monthly electricity consumption in July and September was-2.7% and 5.0% respectively compared with the same period last year, which led to a year-on-year increase of 0.8% in thermal power generation in the province. Due to the commercial operation of the Zunhua unit controlled by the company in July, the company is expected to further outperform the province in the growth rate of power generation in a single quarter. In terms of fuel costs, the average spot price of 5500 kcal thermal coal in Qingang fell 3.1% in the third quarter compared with the same period last year, driving the company's comprehensive gross profit margin in the third quarter by 22.6%, up 5.0% from the same period last year, and 4.2% higher than the previous quarter. Looking forward to the fourth quarter, it is expected that the growth rate of heat supply for power generation will continue to rise and coal prices will remain stable.
The investment income of the participating companies has greatly increased, which is the main reason for the higher-than-expected performance. In the third quarter, the company's stake in the power plant benefited from electricity repair and improved fuel costs, resulting in a year-on-year increase in profits. The company's investment income in the third quarter reached 160 million yuan, a year-on-year increase of 180 million yuan; the investment income in the first three quarters was 230 million yuan, an increase of 867% over the same period last year.
The larger increase in investment income is due, on the one hand, to the low performance base of shareholding projects in the same period last year, and on the other hand to the fact that dividends of some participating companies are recognized in advance in 3Q2020.
Continue to expand the layout of thermal power installation in Hebei. At the end of September, the company won the bid to acquire 30% equity in Shouyang Boqi, a subsidiary of Yangquan Coal Group, and 50% equity in Xishangzhuang low heat value coal thermal power project, with a total payment of 390 million yuan. After the completion of the two projects, the point-to-point network will be used to transmit electricity to Hebei. At the same time, the company and the three quarterly reports announced that they planned to buy 40% of the shares of Qinre Company from the controlling shareholder at a cash consideration of 310 million yuan, corresponding to the acquisition of PB 1.22 times. Qinre Company has an installed capacity of 550MW, which is expected to help the company to further expand the installed layout of thermal power supply to Hebei.
Risk factors: electricity generation is lower than expected, coal price is higher than expected, feed-in electricity price is lower than expected, and the rebound of market electricity share leads to quarterly electricity price fluctuation.
Investment advice. Due to the higher-than-expected results of the company's three-quarter report, the company's investment income forecast for 2020-2022 was increased by 1.26 billion yuan, 1.28 billion yuan, and the company's 2020-2022 EPS forecast was raised by 7% EPS 6% to 0.56 pound 0.67 yuan. The company's current stock price corresponds to the dynamic PE of 2020-2022, which is times higher than that of 10-9-8. With reference to the company's historical valuation, the target price was raised to 7.8 yuan according to 1.15 times the target PB, maintaining the "buy" rating.