Incident: The company released its 2024 quarterly report. The company achieved operating income of 576 million yuan, an increase of 5.1% year on year; net profit attributable to the parent company was 89.87 million yuan, an increase of 9.59% year on year.

Distributed photovoltaics grew steadily, achieving revenue of 241 million yuan, an increase of 12.2% over the previous year: 2024Q1 will continue to focus on the basic market of industrial energy saving and building energy saving, and push for adjustments and withdrawal from non-dominant production capacity areas such as biomass. The company's industrial energy saving achieved revenue of 293 million yuan, building energy saving of 175 million yuan, and comprehensive resource utilization of 77 million yuan. Distributed photovoltaics in the company's industrial energy saving sector continued to grow steadily, achieving revenue of 241 million yuan, an increase of 12.2% over the previous year.

In 2024, the company vigorously expanded decentralized wind power to explore the viability of household photovoltaic business: in 2023, China added 96.29 million kilowatts of distributed photovoltaics, an increase of 88% over the previous year. Distributed photovoltaics had a cumulative installed capacity of 250 million kilowatts, accounting for 42% of the total installed capacity of photovoltaics. China's photovoltaic sector has achieved both centralized and distributed development. Compared with distributed photovoltaics, decentralized wind power accounts for a relatively low proportion of installed wind power. According to the “Report on the Transformation and Development of Green and Low-Carbon Energy in Counties in China”, rural areas are rich in energy resources, and decentralized wind power technology can develop 250 GW. The 2024 Central Committee Document No. 1 proposed promoting rural power grid consolidation and upgrading projects, promoting distributed new energy development in rural areas, and providing further policy support for the development of decentralized wind power. The company will vigorously enter the decentralized wind power industry in 2024. At the same time, the company held household photovoltaic seminars and actively explored the feasibility of further developing household photovoltaic business. After preliminary investigation, pilot work has begun in Guangzhou, Zhanjiang, Maoming, Foshan and other regions.

In 2023, the company was clearly dragged down by the biomass power generation business. The company considered strategic adjustments and withdrew from biomass power generation: the biomass comprehensive utilization business was affected by a combination of unit shutdowns, inadequate subsidies, and continued high fuel prices, and both revenue and gross margin dropped sharply year-on-year. Driven by the biomass comprehensive utilization business, the company's comprehensive resources business achieved operating income of 391 million yuan in 2023, or -39.63% year-on-year, achieving a gross profit margin of -19.44%, a year-on-year decrease of 44.72 pcts, which greatly dragged down the company's operating performance in 2023.

Profit forecast and investment rating: Due to the impact of large biomass losses on performance and considering the possibility of exit from potential projects, we maintained the company's 2024-2026 profit forecast of 452 million yuan, 602 million yuan, and 718 million yuan, up 45.31%, 33.23%, and 19.37% year-on-year, corresponding PE of 40 times, 30 times, and 25 times. Due to the steady development of energy efficiency in the main industry and energy efficiency in buildings, we continue to be optimistic about the company's long-term development and maintain a “buy” rating.

Risk warning: Continued decline in product prices and gross margin due to declining industry demand and increased competition, etc.