The asset restructuring plan strengthens the company's new energy operations. The company recently announced two asset restructuring news. What has received more attention is that the parent company Guoneng Group plans to inject some eligible new energy assets into the company. The estimated scale is about 4 gigawatts. This is in line with the direction in which we anticipated in our previous report that the company will “partially fulfill” the acquisition promise. At the same time, last week, the company also announced a potential deal to sell 27% of Jiangyin Sulong's shares for no less than RMB 1,319 billion, including 1.2 gigawatts of thermal power shares (consolidated project). After the transaction is completed, we estimate that the company will have only 0.6 gigawatts of thermal power and meter installations left. We believe that the purpose of the above two transactions is to reduce competition with the parent company and further strengthen the company's position as the main platform for new energy operations within the department.

Projects to inject new energy in batches are highly flexible, and financial pressure should be reduced. Regarding the parent company's injection of new energy assets, the company mentioned that potential projects still need to be injected after due diligence and audit evaluation are completed.

Although the company has not given a schedule, since the premise is to be injected in batches, we estimate that the first batch of projects will probably start injecting into the company's work within this year. Currently, we prefer that the company will use internal resources and bank loans to pay the purchase amount in installments to reduce the company's financial pressure. Even if the company needs equity financing, the scale should be smaller.

The direction of integrating the parent company's remaining new energy assets is clear, and the schedule is yet to be updated. We understand that investors still have a gap with regard to the current acquisition of 4 gigawatts of installed capacity compared to the original plan of 20 gigawatts. However, the announcement mentions that “China Energy Group will continue to fulfill its promises and continue to promote the reduction and resolution of competition in the industry”, which should be viewed as a change in the direction of the company's further acquisition of the parent company's new energy projects. As to whether there is a long-term timeline, we think management will have an opportunity to give more detailed explanations during the August results meeting.

Asset restructuring should support valuation increases. As the above transaction has yet to be implemented, we are keeping our target price and financial forecast unchanged. We believe that the company's restart is significant for the acquisition of the parent company's new energy assets. At the same time, since the new leadership team took office, important restructuring plans for these two projects have already been introduced, and the execution is worth looking forward to by investors. In the short term, we think we will support a slight valuation increase. The medium- to long-term valuation increase will depend on the company's visibility in the medium to long term as it further acquires the parent company's assets.