The company achieved a net profit of 6.05 billion yuan in the first three quarters of 2023, a year-on-year increase of 46.7%, in line with expectations. mainly benefited from the Yazhong new power station generation capacity release superimposed Jinguan outward electricity price rise to boost hydropower performance, fuel cost downward improvement of thermal power profitability, Fengguang installed electricity growth brought about by performance growth and financial savings compared with the same period last year. The company relies on hydropower to build a water and landscape integration base in the Yalong River Basin, which is expected to contribute to the long-term growth of the Yalong River Company and bring full performance flexibility for the company. We maintain the company's EPS forecast for 2023-2025 of 0.94, 1.14, and 1, respectively, 30 yuan, and maintain the "buy" rating, with a target price of 15 yuan.

The net profit of returning home in the first three quarters was 6.05 billion yuan, and the high increase in performance was in line with expectations. The company's 2023Q1~3 realized operating income of 42.55 billion yuan, an increase of 11.5% over the same period last year (after retroactive adjustment, the same below); the net profit returned to the mother was 6.05 billion yuan, an increase of 46.7% over the same period last year; and the EPS was 0.79 yuan, an increase of 48.6% over the same period last year.

On a quarterly basis, 23Q3 achieved an operating income of 16.18 billion yuan, an increase of 4.6% over the same period last year, a net profit of 2.72 billion yuan, an increase of 52.7% over the same period last year, and an EPS of 0.36 yuan, an increase of 54.5% over the same period last year.

Hydropower performance release & Thermal Power profit Restoration & Green Power installed growth, promoting the company's performance growth. Hydropower, thermal power and green power sectors have made positive contributions to the high performance growth of the company in the first three quarters. In terms of hydropower, according to the company's announcement, the dry water in the flood season caused the Yalong River's power generation to decline by 7.41% in the first three quarters compared with the same period last year to 62 billion kilowatt-hours. However, the Jinguan power supply group sent out the Jiangsu electricity price to rise, the Yazhong unit capacity climbing and the improvement of the power supply and demand situation in Sichuan Province and other factors effectively made up for the impact of electricity, and promoted the performance release of Yalong River Company. In terms of thermal power, the market price of Q1y3 thermal coal has dropped significantly compared with the same period last year. According to Wind data, the average spot price of 5500 kcal thermal coal in Qinhuangdao Port has dropped 20% compared with the same period last year, driving the company's thermal power plate cost reduction and profit repair; in the case of green power, the growth of installed scale has promoted 23Q1~3 's wind power generation to increase by 34.1% year on year, contributing to a certain increase in the company's revenue performance. The narrowing of exchange losses and the decline in corporate financing costs in a low interest rate environment pushed the company to save 770 million yuan in financial expenses in the first three quarters compared with the same period last year, further contributing to high performance. Looking forward to the whole year, the company's performance is fully guaranteed due to the gradual recovery of incoming water from the Yalong River Basin since September, the continuation of the year-on-year decline in fuel costs, and the release of power generation capacity of new projects such as Cora Photovoltaic and Labashan Wind Power.

Build a clean energy base around hydropower to open up imagination for the future performance of the Yalong River. According to the company's website, Yalong River Company plans to develop pumped storage, wind power, photovoltaic and other clean energy projects around large hydropower to build a water and landscape integration base in the Yalong River basin, with a broad space for installed growth. In terms of hydropower, Yazhong Yangfanggou and Lianghekou power stations have been fully put into operation in 22Q3, and the performance is expected to be further released after the normalization of incoming water. The construction of Kara, Mengdigou and other power stations is steadily advancing, and the Yagen first-class power station has been approved; in terms of pumped storage, the construction of Lianghekou hybrid pumped storage power station has been started, which is expected to bring stable performance returns after it is put into operation. In terms of scenery, Yalong River Company plans to build scenic projects based on the existing regulation capacity of large hydropower and delivery lines. Recently, Kola photovoltaic, Labashan wind power and other scenic projects have been put into production one after another, and the subsequent base scenic projects are gradually completed and put into production, which is expected to promote the sustained growth of installed electricity. We expect that the construction of the water and landscape integration base in the Yalong River Basin will further open up the long-term growth space of the Yalong River Company and bring full performance flexibility for the company.

Risk factors: the approved electricity price of Yazhong new power station is low; the incoming water is dry; the installation of new energy is not as expected; the sharp decline in demand affects electricity consumption; coal prices rise sharply, and so on.

Earnings forecast, valuation and rating: we maintain the company's homing net profit forecast for 2023 to 2025 of 6.97 billion / 8.47 billion / 9.67 billion respectively, with a year-on-year growth rate of 71%, 21%, 14%, respectively, corresponding to the EPS forecast of 0.94, 1.14, and 30 yuan, respectively, and the current stock price corresponding to the dynamic PE of 2023 to 2025 is respectively times that of 13-11-9. With reference to the average PE of comparable hydropower companies (Changjiang Electric Power, Sichuan Investment Energy, Huaneng Hydropower, Qianyuan Electric Power) in 2024, the company is given 14 times the target PE in 2024, corresponding to the target price of 15 yuan, maintaining the "buy" rating.