20Q3 homing net profit year on year + 347%, increase profit forecast and target price on October 28, the company released three quarters of 2020 report, the first three quarters of the company to achieve revenue / homing net profit / deduction of non-homing net profit 99gamma 810 million yuan, year-on-year change-2.8% Universe 78% Universe 83% 20Q3 realized revenue / return net profit / deduction of non-home net profit 32.8 million yuan, with a year-on-year change of + 2.2%, 347% and 421%. The return net profit is in line with the company's performance forecast. Power generation has continued to pick up and the scale of heating has been expanded. The benefit of participating in the power plant rebounded, leading to a substantial increase in investment income. The profit forecast is raised to 0.54, 0.56 and 6.84 for EPS and 7.25 and 7.67 for BPS, respectively, and the target price is raised to 6.89 for 21-year 0.95x, maintaining the "buy" rating.
20Q3 power generation rebounded heating growth, fuel costs fell to boost profit margins in the first half of the year, the company's electricity generation declined significantly (holding subsidiary yoy-12%, shareholding company yoy-14%), but with the weakening of the impact of COVID-19 's epidemic, 20Q3's power generation is in the stage of recovery.
With the expansion of the heating scale of the company, the superimposed small boilers in Hebei area have been gradually eliminated, and the heat supply has maintained an increase over the same period last year.
20Q3's gross profit margin is 22.6%/yoy+5.0pct, the supply and demand situation in the coal market is relatively loose, the company further strengthens fuel management, and fuel costs are lower than the same period last year.
Continue to acquire high-quality assets of the same industry, actively expand the new performance growth point 20Q3 Company's investment income increased by about 180 million yuan over the same period last year, thanks to a sharp rebound in the efficiency of the participating companies.
The company's asset-liability ratio is relatively low in the industry (55.4% at the end of 20Q3), good operating cash flow and abundant capital on hand, mergers and acquisitions of high-quality assets in the same industry will become one of the important means of business growth.
In September, the company announced that it planned to acquire 30 per cent of Yangcoal Shouyang Boqi (unlisted) and 50 per cent of Yangmei West Shangzhuang Thermal Power (unlisted), with contributions of 180 million yuan and 210 million yuan respectively. In October, the company announced that it intends to inject 40% equity into Qinre Company (unlisted). The net profit of Qinre Company in 2019 and January-August of 20 years is 40 million yuan and 63.2 million yuan respectively.
Raise the profit forecast, the target price is 6.89 yuan, the "buy" rating of power generation rebounds, the heating expansion, the benefit of participating in power plants rebounded, and the profit forecast is raised. We estimate that the 20-22 return net profit of the company is 9.7xmax 1.03m (the previous value is 8.5pm), EPS is 0.56x0.58, PE is 10.0xmax, PE is 9.4x, BPS is 6.84x7.25pm, and PB is 0.80x/0.75x/0.71x. With reference to the company's 21-year wind consensus expectation average P/B0.77x, the company, as a regional thermal power leader, has higher upward flexibility in profit when coal prices go down, giving the company 21-year 0.95xP/B, corresponding to the target price of 6.89 yuan (the previous value is 6.77 yuan) and maintaining a "buy" rating.
Risk hints: coal price upward risk; electricity price downside risk; market electricity trading proportion increases.