Events:

The company publishes its 2023 semi-annual report. In 2023, H1 achieved a total operating income of 5.689 billion yuan, an increase of 9.11% over the same period last year, and a net profit of 31.2993 million yuan, a decrease of 88.87% over the same period last year.

Poor water supply is a drag on the main business of selling electricity.

In the first half of 2023, the water from the basin where the company's generator units are located is seriously dry. In the first half of the year, electricity generation was only 856 million kilowatt-hours, down 43.75 percent from the same period last year, while online electricity was 845 million kilowatt-hours, down 43.86 percent from the same period last year.

From the point of view of the electricity sales side, the company achieved 6.725 billion kilowatt-hours of electricity in the first half of the year, an increase of 5.06% over the same period last year, reaching a record high in the same period. The increase in allotted electricity but the decrease in spontaneous electricity indicates that the scale of the company's purchased electricity is increasing. From the perspective of profitability, the profitability of spontaneous hydropower is much higher than that of outsourced electricity. In 2022, the gross profit margin of the company's spontaneous hydropower reached 61.4%, while the gross profit margin of purchased electricity was only 12.1% in the same period, and the gross profit margin of spontaneous hydropower was higher than that of 49.3pct. Due to the increase in the proportion of purchased electricity with low gross margin, and the increase in the price of purchased electricity in the first half of the year was higher than that of the average price of electricity sold in the first half, the profit of the company's power business declined in the first half of the year. In the first half of 2023, the company's electric power business achieved an operating profit of 119 million yuan, down 72.96% compared with the same period last year. In addition, due to the decline in the gross interest rate of electrolytic manganese, the company's manganese and trading business lost 39.64 million yuan in the first half of the year compared with the same period last year; due to losses made by associated companies such as Tiantai Energy, the investment income lost 14.76 million yuan in the first half, a decrease of 114 million yuan compared with the same period last year.

The rapid development of integrated energy business has gradually become a new momentum of the company.

In the first half of 2023, the company made a profit of 37.37 million yuan in its comprehensive energy business. In May 2022, the Wanzhou thermal power project was officially put into operation, and the year-on-year profit increase of the comprehensive energy project represented by the Wanzhou Jiulong Park cogeneration project made up for part of the impact of profit reduction. The strategic development plan of the 14th five-year Plan released by the company in 2021 clearly puts forward the characteristic expansion of integrated energy business, gradually clarifies the characteristic development strategy of "centering on large users and developing large projects", and is focusing on "energy station (island)". Distributed photovoltaic, energy trusteeship (including energy saving), source network load and storage integration "four major modes to carry out integrated energy service business The main development of independent energy storage, user-side energy storage, electric heavy truck charging and storage integrated business. In terms of independent energy storage, in early August 2023, the Yongchuan District Songfu and Liangjiang New District Longsheng independent energy storage power station projects with total installed scale 300MW/600MWh were officially put into operation with full capacity in early August; in terms of consumer-side energy storage, relying on the advantage of market-oriented electricity sales resources, the company accelerated the customer-side energy storage business layout and the implementation process of decided projects in Guangdong, Zhejiang, Anhui, Chongqing and other places. By the end of the reporting period, 28 projects have been completed and put into operation, with a total capacity of 50MWh. The company's integrated energy business is developing rapidly and is expected to gradually become a new driver of the company's profit growth.

Profit forecast and valuation: in the first half of the year, due to the decline in profits due to the reduction of spontaneous electricity, the company is expected to return to its mother in 2023-2025 with a net profit of 5.16pm 916pm (the previous value is 9.19pm 11.67pm 15.27), corresponding to PE 30.7pm 17.3pm 12.6 times, maintaining the "buy" rating.

Risk tips: reduced power demand; less water leads to a decline in power generation; the cost of purchasing electricity has further increased; the progress of integrated energy business is not as expected.