Earnings for the 3rd quarter were lower than expected due to one-off projects. The company's profit for the third quarter fell 46% year on year to 160 million yuan (RMB, same below), lower than our expectations of 210 million yuan. The main differences were: (1) the joint venture/joint venture company turned a loss of 24 million yuan in the 3rd quarter (profit of 112 million yuan in the same period last year), which we cannot rule out was due to impairment adjustments; and (2) it recorded a credit impairment of 37 million yuan during the period. Sales costs in the third quarter increased by 11.8% year-on-year, mainly due to increased depreciation due to increased wind and installed capacity. During the period, power generation volume fell 1.6% year on year, causing the company's gross profit to fall 24.5% in the 3rd quarter, and gross margin fell 8.3 percentage points to 26.5% year on year. Since the company has announced the monthly power generation volume, the negative impact of the market on this part should have been anticipated.

Wind speed in the third quarter affected the hourly decline in utilization, and feed-in tariffs improved month-on-month. Wind speed declined year on year during the period, wind power generation decreased by 4.8% year on year, and PV utilization hours did not change much year over year. The year-on-year increase in new installed capacity led to a 33% increase in power generation, making up for the decline in some wind power generation. We estimate that the company's average electricity price for Scenery in the 3rd quarter increased by about 0.02 yuan per kilowatt hour over month, similar to the situation of Longyuan Electric Power in the same industry (916 HK/purchase).

There is still financial flexibility to allow faster installation. Currently, we maintain our forecast that the company will add 1.5/2.2/3.0 gigawatts of installed capacity in 23-25. At the beginning of the year, the company still maintained its goal of adding 40 gigawatts of new installed capacity in 2025, which is still a long way from our forecast of nearly 21 gigawatts by the end of the year. Currently, we expect that the net debt ratio between 24-25 will drop to 117%/111% due to the reduction in the unit cost of wind and wind equipment. We believe that there is still room for the company to speed up self-construction projects and carry out acquisitions, which still depends on whether the company can obtain projects with reasonable returns.

The valuation is close to an inflection point, but it lacks a strong catalyst. We keep our earnings forecast unchanged. At present, the company's valuation has been pulled back 4.6 times the 24-year forecast price-earnings ratio, which is below the 5-year average of one standard deviation. It should have reflected the market's failure to grasp the financing window to speed up the progress of the installation of equipment through acquisitions. We believe that the current valuation level has begun to be attractive; there is only a lack of new catalysts to drive a breakthrough. At the same time, the impact of the high profit base due to fan compensation payments and impairment rebates in '22 also began to decline. It is estimated that with the current progress in self-built wind and installation, it can still drive a compound annual profit growth of 7% over the 23-25 years. We currently assume that there will be no new catalysts driving the valuation increase until the full year results are announced in March next year, maintaining a target price of HK$2.25 and a neutral rating.