The incoming water was obviously repaired in the third quarter, and the decline in investment income led to a decrease in net profit in the first three quarters compared with the same period last year. In the third quarter of 2023, the company realized operating income of 2.702 billion yuan (- 11.01%), net profit of 306 million yuan (+ 83.52%), and non-return net profit of 274 million yuan (+ 209.50%), mainly due to obvious improvement in incoming water and an increase of 141.75% in electricity generation compared with the same period last year. At the same time, the cost of purchasing electricity decreased compared with the same period last year. The company's operating income in the first three quarters was 8.391 billion yuan (+ 1.71%), the net profit was 337 million yuan (- 24.70%), and the non-return net profit was 256 million yuan (- 45.69%). This is mainly due to the decline in investment income and electrolytic manganese business profits of associated companies such as Chongqing Tiantai Energy Group Co., Ltd. in the first three quarters, the company's investment income in the first three quarters was 17 million yuan, down 91.05% from the same period last year.

The incoming water has improved significantly, and the power generation in the fourth quarter is expected to be further repaired. In the first half of the year, the hydropower station under the company was seriously affected by the dryness of the incoming water, and the power generation decreased obviously. The precipitation in Chongqing improved in the third quarter. On 7-8-9, the average monthly precipitation was 481x80x191mm, an increase of 234%, 371% and 57% compared with the same period last year. According to the weather forecast of Chongqing Meteorological Bureau for October, the average precipitation in the city in October is expected to be 110 mm, 10% more than that in the same period of the normal year. With the continuous improvement of incoming water, the company's power generation in the fourth quarter is expected to be further repaired.

The independent energy storage power station has been completed and put into operation, and the comprehensive energy business has continued to develop. In early August 2023, the Songli 200MW/400MWh Lithium Iron Phosphate Independent Energy Storage Power Station Project in Yongchuan District of Chongqing and the Longsheng 100MW/200MWh Lithium Iron Phosphate Independent Energy Storage Power Station Project in Liangjiang New District were completed and put into full capacity operation. As the lead party, the company won the bid for the BOT general contract project of the 2 × 135MW residual gas comprehensive utilization power generation project in the high pressure operation zone of Benxi Iron and Steel Co., Ltd., a subsidiary of Angang Group.

Buyback and increase holdings are carried out together to demonstrate confidence in future development. On September 28, 2023, the company issued a buyback announcement to buy back the company's shares with its own funds, with a total repurchase amount of 100-200 million yuan and a repurchase price of no more than 10.00 yuan per share. On October 11, the company bought back 2.03 million shares for the first time through centralized bidding, with a total payment of 16 million yuan. In addition, Changjiang Electric Power, the company's controlling shareholder, plans to increase its stake in the company in the next 12 months from September 28, 2023, with an increase of 0.5 billion yuan to 100 million yuan, without setting a price range.

Risk hints: electricity prices have fallen sharply, incoming water has fallen short of expectations, electricity purchase costs have increased significantly, and the progress of integrated energy business has fallen short of expectations.

Investment advice: downgrade earnings forecasts and maintain a "buy" rating.

Considering the combined influence of the dry water in the first half of the year, the decrease in investment income and the landing of comprehensive energy business, the profit forecast is lowered. It is estimated that the net return profit for 2023-2025 is 5.87 billion yuan (1.295 billion yuan) (the original figure is 7.21,0651,297 million yuan, and the downward adjustment is 1916thumb 11%), and the year-on-year growth rate is 23.3 million 52.4 percent. Earnings per share are 0.31 PE per share, which corresponds to the company's current share price at 25-16-13, maintaining a "buy" rating.