The profit growth in the first half of the year was slightly better than expected under the reduction of financial expenses. In the first half of 2023, the company's profit rose 14.9% year-on-year to 2 billion yuan (RMB, the same below), accounting for 64% of our annual profit estimate, slightly better than expected. We think the better profit is due to a 18.4% year-on-year drop in financial expenses. The company's operating profit increased by 8% year-on-year, mainly driven by 14.7% growth in the wind power sector, while the photovoltaic / hydropower sector was flat / down 66% due to the decline in the utilization of hours. The company's overall power generation in the first half of the year increased by 9.2% compared with the same period last year, driven by a year-on-year increase of 24.1% and 4.4% in wind and gas power generation. In the first half of the year, 220 megawatts of scenery projects were connected to the grid, and the total wind / optical assembly accounted for 63% of the company's total installed capacity (13.9 gigawatts).

The group responds to "Green Power coming to Beijing" with high clarity of project development. In the Beijing Renewable Energy alternative Action Plan (2023-2025), Beijing has set a target of 30 billion kilowatt-hours of green power by 2025. In order to meet this goal, the parent company Jingneng Group promotes "Green Power into Beijing" to strengthen the development of wind / light projects in Zhangjiakou, Chengde, Xilingol, Wulanchabu and Datong and other places around Beijing. The company has wind / light project development in Xilingol and Chengde with high clarity.

In addition, the company has also made a breakthrough in offshore wind power, the first project is Shantou 1 gigawatt of offshore wind power, has carried out the declaration work. At the same time, the company has also started pumped storage projects, including 1.4 gigawatts in Zhangjiakou and 1.2 gigawatts in Longfengshan in Shijiazhuang.

The construction has made good progress in the first half of the year, and 3 gigawatts should be connected to the grid in the whole year. The management reiterated the plan to add 15 gigawatts (wind / light is about 7 gigawatts / 8 gigawatts) during the 14th five-year Plan period. The company has completed 2.6 gigawatts of development capacity in the first half of the year, and we expect to have about 1.8 gigawatts of wind power / photovoltaic projects completed this year. According to the company's current plan, we predict that the company will add 3.0 GW to 3.5 GW per year in 2023-25, which is very close to the target of 15 GW during the 14th five-year Plan.

Earnings are forecast to grow by 15% over the next three years, and dividend yields are still attractive, keeping buying. We slightly increased the company's earnings per share by 1-3% in 2023-25, mainly reflecting the reduction in financial expenses. The company's new installation is expected to perform well, driving a 15 per cent compound growth rate of earnings per share in 2022-25. In addition, the management said that it still hopes to maintain a stable dividend policy in the future, and we expect to maintain a dividend of 0.12 yuan per share in 2023-25, with a current dividend yield of 7.7% in 2023. In terms of valuation, we use the price-to-earnings ratio of 5.3 times earnings (the five-year average) in 2023 as the benchmark, after adjusting for the decline of the RMB against the Hong Kong dollar, the target price is slightly lowered from HK $2.31 to HK $2.23. Maintain the buy rating.