Summary of events: on October 26, the company released a report on the third quarter of 2023, with operating income of 3.494 billion yuan in the first three quarters, down 4.0% from the same period last year; net profit from home was 555 million yuan, down 35.5% from the same period last year; and net profit from non-return was 538 million yuan, down 18.3% from the same period last year. In the third quarter, the company achieved operating income of 1.258 billion yuan, an increase of 11.3% over the same period last year, a net profit of 258 million yuan, an increase of 53.6% over the same period last year, and a net profit of 258 million yuan, an increase of 56.0% over the same period last year.

Shuifeng has all contributed to boost the internal differentiation of wind power: 3Q23 has completed 2.482 billion kilowatt-hours of electricity generation, an increase of 9.2% over the same period last year. Of these, hydropower, wind power and photovoltaic generated electricity of 9.44,7.03 and 835 million kilowatt hours respectively, an increase of 10.8%, 4.1% and 10.8% respectively over the same period last year. Land breeze and sea breeze split up. Q3 land breeze generated 390 million kilowatt-hours of electricity, an increase of 14.2 percent over the same period last year, while sea breeze generated 313 million kilowatt-hours of electricity, down 6.3 percent from the same period last year.

Electricity repair diluted electricity cost, financial reduction to boost performance: we estimate that Q3 company kilowatt-hour operating cost (power generation caliber) 0.2218 yuan / kWh, down 0.9 cents / kWh, month-on-month drop of 3.1 cents / kWh, cost reduction pushed up single-quarter gross profit margin to 56.3%, 2.6% higher than the same period last year, 1.2% higher than the previous year. With the fixed increase of funds raised in place, the company adjusted the financial structure, Q3 financial expenses fell 61 million yuan to 238 million yuan compared with the same period last year. The cost reduction promoted the company's Q3 operating profit to increase by 191 million yuan to 478 million yuan compared with the same period last year, and the operating profit margin reached 38.0%, an increase of 12.6% over the same period last year and 9.5% higher than the previous year.

Investment advice: Q3 hydroelectric power repair diluted fixed costs, while raising funds in place financial expenses decreased, both jointly push up operating profits, Q4 hydropower is still expected to continue to rebound to help the full-year performance repair. Taking into account electricity, electricity price and installed pace, adjust the profit forecast of the company. It is estimated that the annual EPS on 23-24-25 will be 0.28max 0.2max 0.54 yuan (the previous value is 0.32pm 0.45max 0.59 yuan), corresponding to the closing price PE of 30.6 shock 20.2pm 15.5 times on October 26th. Considering the growth of new energy and the flexibility of hydropower performance, the company is given 25.0 times PE in 2024, corresponding to the target price of 10.50 yuan, maintaining a "cautious recommendation" rating.

Risk hints: 1) the inflow of the river basin is dry; 2) the decline in demand suppresses the consumption of electricity; 3) the fluctuation of market transaction electricity price; 4) fiscal and taxation and other policy adjustments.