Key points of investment

The performance in the first half of the year was good, and the solar thermal storage business grew rapidly:

In the first half of 2023, the company achieved revenue of 21.317 billion yuan, an increase of 4.98% over the previous year; the profit attributable to common shareholders of the company was 1,680 million yuan, an increase of 114.36% over the previous year, and a basic profit of 0.14 yuan per share. The increase in the company's performance mainly benefited from a sharp year-on-year reversal of losses in thermal power, as well as an increase in revenue and profit in the wind and wind sector, effectively compensating for the decline in profits from hydropower due to the depletion of incoming water. Among them, thermal power achieved profit after wind tax of 562 million yuan, an increase of 1,658 billion yuan over a loss of 1,096 million yuan in the same period last year; wind power and photovoltaic profits increased by 69.70% and 21.69%, respectively.

Benefiting from declining coal costs, thermal power profits will continue to improve in the second half of the year:

In the first half of the year, the company's coal coverage rate reached 95%, the compliance rate was 93%, and the actual share of CCAC coal was 85%, an increase of 10 percentage points over the previous year. It is expected that the company's coal coverage rate and cash out rate will remain stable or increase slightly in the second half of the year; the company's coal costs fell 10% year on year in the first half of the year, and it is expected that the second half of the year will drop another 10% compared to the first half of the year. The company plans to keep 8-10GW coal power units, most of which are high-quality Kengkou projects guaranteed by Changxie Coal. As coal prices continue to decline, we look forward to the flexible release of coal and power profits in the third quarter to raise the company's overall performance level.

China Power Investment Corporation has invested heavily in assets to accelerate the company's clean energy transformation:

The total installed capacity of the assets injected by the National Power Investment Corporation this time exceeds 9.2 million kilowatts, of which 7.5 million kilowatts have been put into production, 1.7 million kilowatts of projects under construction, and a total transaction consideration of 10.785 billion yuan. After the transaction is completed, EPS is expected to increase by 0.04 yuan and help accelerate the company's clean energy transformation. It is estimated that by the end of 2023, the company's consolidated installed capacity will reach about 45,186 megawatts, of which clean energy will reach about 34,106 megawatts (wind power and photovoltaics will reach about 27,403 megawatts), and clean energy accounts for more than 75% of the installed capacity.

Maintaining the purchase rating, target price of HK$4.38:

We maintain the company's target price of HK$4.38, which is equivalent to 12.5 times and 9 times PE in 2023 and 2024. The target price has room for a 49% increase from the current price, giving us a buying rating.