Incidents:

The company released its 2023 annual report. In 2023, the company achieved operating income of 2,904 million yuan, an increase of 8.47%; achieved net profit of 482 million yuan, an increase of 76.06% over the previous year; realized net profit of 445 million yuan, an increase of 70.85% over the previous year. With the peak of wind power project commissioning, the company's performance achieved high growth.

Intensive commissioning of new energy power generation has led to a significant increase in performance:

New energy power generation is the company's core development direction. Currently, the company's new energy business is mainly located in Yunnan Province. 2023 is the year the company's new energy projects were put into operation. According to the company's announcement, by the end of 2023, the total installed capacity of the company's wind power and photovoltaic projects reached 1,581 million kilowatts, an increase of 304% over the 520,000 kilowatts at the end of 2022. The increase in installed capacity is mainly due to the commissioning of the Tongquan Wind Farm, Yongning Wind Farm, and Jinzhong Wind Farm Phase I projects. The total installed capacity of the three projects is 1.4 million kilowatts. The Tongquan and Yongning wind farms achieved full capacity connectivity in January 2023 and December 2023 respectively; the first fan of Jinzhong Wind Farm Phase I was connected to the grid in November 2023. At the same time, the company has a geographical advantage and the profitability of high-quality wind resource guarantee projects in Yunnan Province. According to the company announcement, the company's average power generation utilization hours reached 2,781 hours in 2023, 556 hours higher than the national average of 2225 hours. At the same time, benefiting from the year-on-year improvement in wind conditions in Yunnan Province in 2023, the average number of hours used by the company increased 248 hours over the same period last year, and high-quality resource endowments guarantee the profitability of the project to a certain extent.

Ongoing projects are sufficient to add to the Group's expectations, and high growth is expected to continue:

In March 2023, Yunnan Province issued the “Notice on Certain Policies and Measures to Accelerate Photovoltaic Power Generation”, which requires ensuring that the scale of new energy development is at least 15 million kilowatts per year, and that the company is expected to benefit as a provincial enterprise under the vigorous promotion of new energy development policies. By the end of 2023, the company has approved 2,066 million kilowatts of new energy projects, providing strong support for subsequent performance growth. According to the company's plan, the target is to reach 5.13 million kilowatts of new energy installed during the “14th Five-Year Plan” period. At the same time, the company is the only new energy operating platform under the Yunnan Investment Group. According to the Group's bond collection instructions, it has put into operation 1.014 million kilowatts of photovoltaics as of March 2023. Since the listed company and parent company Yunnan Energy Investment Group have signed an agreement to avoid competition in the same industry, the possibility that new projects within the group will be injected into listed companies in the future, leading to continued growth in long-term new energy installations. Currently, the main risk in the company's new energy business is the fluctuation in electricity prices caused by the increase in the proportion of new energy power generation participating in market-based transactions. According to the “Notice on Matters Relating to Further Improving the New Energy Feed-in Tariff Policy” issued in December 2023, the market-based transaction ratio for wind power and photovoltaic projects connected to the grid from January to June 2024 is 50% and 35% respectively; the market-based transaction ratio for wind power and photovoltaic projects connected to the grid in July-December is 55% and 45% respectively. Since the market-based electricity price of new energy generation is lower than the benchmark price of thermal power generation, the increase in the market-based ratio will affect new projects Online electricity prices.

The salt industry has declined slightly, and the natural gas business can be expected to recover:

The salt industry sector's performance declined slightly due to the decline in industrial salt prices. According to the two-alkali industrial salt price index, the industrial salt price index for December 2023 fell 21% from the highest point in April 2022. The subsidiary Yunnan Salt Industry Co., Ltd. had a net profit of 169 million yuan in 2023, a slight decrease of 2.3% year on year. Domestic industrial salt production capacity faced dewarehousing pressure in 2024, and demand is expected to continue to be weak. In the natural gas sector, due to the fact that contract gas prices for upstream gas companies remained high in 2023, the company was in the cultivation and expansion stage. The subsidiary Yunnan Natural Gas Co., Ltd. lost 146 million yuan. As natural gas business costs improved and downstream customers continued to expand in 2024, performance is expected to gradually recover.

Investment advice:

The company's revenue for 2024-2026 is estimated to be RMB 3.885 billion, RMB 4.767 billion and RMB 5.2 billion respectively, with growth rates of 32.3%, 24.1%, and net profit of 620,000 yuan, 770 million yuan, and 890 million yuan respectively, with growth rates of 28.6%, 24.4%, and 15.9%, respectively. The investment rating of Buy-A is maintained, and the target price for 6 months is RMB 12.06.

Risk warning: Project commissioning progress falls short of expectations, utilization hours for new energy projects fall short of expectations, and risk of falling salt industry product prices.