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Star Power released its 2022 mid-term report. From January to June 2022, it achieved operating income of 1,065 million yuan, up 29.25% year on year; net profit attributable to the parent company was 79 million yuan, up 27.92% year on year; net profit attributable to the parent company after deducting non-recurring profit and loss was 78 million yuan, an increase of 32.85% over the previous year. By the end of June, the company's total assets reached 3,883 billion yuan, and net assets attributable to shareholders of listed companies were 2,575 million yuan.

reviews

Performance rose steadily in the first half of the year

From January to June 2022, the company achieved operating income of 1,065 million yuan, up 29.25% year on year; realized operating profit of 94 million yuan, up 25.56% year on year; achieved net profit attributable to the parent company of 79 million yuan, up 27.92% year on year; achieved a comprehensive gross profit margin of 11.74%, down 0.25 percentage points from mid-2021, an increase of 0.35 percentage points compared to the full year of 2021.

As far as the supply side is concerned, incoming water conditions from the upper reaches of the Fujiang River were relatively good in the first half of the year, injecting sufficient impetus into the company's hydroelectric power generation, which prompted the company to complete 248 million kilowatt-hours of spontaneous feed-in electricity, an increase of 18.36% over the previous year, and completed electricity sales of 1,819 million kilowatt-hours, an increase of 32.41% over the previous year. As far as the demand side is concerned, the epidemic control situation in the Suining region was relatively good in the first half of the year. The resumption of work and production progressed in an orderly manner, and the domestic electricity demand of enterprises and residents in the region increased. In addition, the company's water supply business is also developing steadily. In the first half of the year, it sold 22.744,300 tons of water in the Suining region, an increase of 6.64% over the previous year; its subsidiary Sichuan Star New Energy Technology Co., Ltd. also effectively expanded services such as power equipment installation and intelligent operation and maintenance, driving a steady increase in performance.

The regional power supply and water supply business is stable, and the growth trend is relatively stable

The company has a complete power supply and water supply network and service system, with a power supply market share of 100% within its jurisdiction. As of the end of June, the company had 15 110 kV substations and 21 35 kV substations, with a total subcapacity of 2,115,500 kVA and 699,400 electricity users; the water supply market share in the district reached more than 90%, with a water supply capacity of 225,000 tons/day, with a water supply capacity of 225,000 tons/day, and 276,600 tap water users. The economic development trend in the Suining region has been relatively good in recent years, and the control of the epidemic is relatively effective. It is expected that a healthier macroeconomic environment after the epidemic recedes in the future will provide impetus for regional industrial development and corresponding electricity demand to continue to rise. Demand elasticity in the water supply industry is relatively low, and China has promoted the construction of a water-saving society in recent years. It is expected that the development of the water supply business may be relatively stable.

Profit forecasting

The company's interim performance data slightly exceeded our previous expectations, and we raised the company's profit forecast to a certain extent. We expect that in 2022-2024, the company will achieve operating income of 2,272, 2,588 and 2,895 million yuan, net profit attributable to the parent company of 154, 198 and 250 million yuan, and a total share capital of 421 million shares, corresponding to EPS 0.37, 0.47 and 0.59 yuan.

The main points of valuation are as follows: On September 2, 2022, the stock price was 9.02 yuan, corresponding to a market value of 3.801 billion yuan, and PE in 2022-2024 was about 24.67, 19.21, and 15.23 times. The company is a local hydropower enterprise in the Suining region of Sichuan. Businesses such as electricity supply and water supply are growing steadily, and it is expected to reap dividends from rising electricity demand brought about by industrial economic development in the future.

Risk warning: Local electricity demand growth falls short of expectations, water conditions in the Peijiang River Basin have changed greatly, and industrial development falls short of expectations