Investment Rating - The report maintains a "Positive" investment rating for the power generation industry [11]. Core Viewpoints - The thermal power industry is at a historical turning point with a shift from old to new investment frameworks, suggesting that the capital market's duration for thermal power may exceed market expectations. Both the "old cycle framework" and the "new dividend framework" provide logical support for this view [5][19]. - The profitability per kilowatt-hour for thermal power has recovered to a high level, with major companies like Huaneng International achieving a profit of 0.051 yuan/kWh in the first three quarters of 2025, indicating a significant recovery [17][19]. - The shift in investment frameworks has led to a reassessment of valuation methods, with price-to-earnings (PE) ratios and dividend yields becoming more relevant than price-to-book (PB) ratios, which have shown distortions in the past [6][28]. Summary by Sections Profitability Recovery and Investment Logic - The report discusses the recovery of profitability in the thermal power sector, highlighting that the current environment allows for effective transmission of coal price increases through electricity prices, thus maintaining profitability [5][19]. - The capacity price mechanism is expected to stabilize earnings, reducing the correlation between profitability and coal prices, which enhances predictability and sustainability of future earnings for thermal power operators [23][24]. Valuation Methods - The report critiques the traditional reliance on PB ratios for valuing thermal power companies, suggesting that PE ratios or dividend yields are more appropriate under the new investment framework. Some thermal power companies have PE ratios below 10x, indicating potential for revaluation as the market adjusts [6][28][30]. National vs. Regional Power Companies - The report recommends focusing on national thermal power companies like Huaneng International and Datang Power, as they are expected to perform better due to the capacity price mechanism and the central government's enhanced focus on value management and dividend advocacy [7][36]. Coal Price Dynamics - The report notes that the expected correlation between rising coal prices and falling thermal power stock prices has weakened, particularly as the market transitions to a new investment framework. The anticipated increase in capacity prices in 2026 is expected to further support thermal power operators' earnings [8][41]. Future Profit Growth Points - Major thermal power companies are expected to adapt flexibly to industry and regional policy changes, allowing them to diversify their energy sources and mitigate risks associated with over-reliance on a single energy type. The report also highlights the potential for increased shareholder returns as capital expenditures peak [9][49].