The company announced that in the first quarter of 2024, it achieved revenue, net profit, and deducted non-net profit of 150.53, 9.06, and 1,056 billion yuan, an increase of 2.3%, -11.1%, and 10.6% over the previous year.

Performance was in line with expectations, and orders continued to grow. In the first quarter, the company achieved revenue of 15.052 billion yuan, an increase of 2.3% year on year, and the cost ratio increased by 1.1 pct to 11.2%. The net profit decreased by 11.12% year on year during the reporting period, mainly due to changes in fair value changes caused by changes in Sichuan Power's stock price. After excluding this influencing factor and other non-recurring profit and loss, non-net profit increased 10.6% year on year. The company's debt ratio at the end of the period was 67%, and cash in hand was $17.3 billion. In terms of orders, the company ordered 86.5 billion yuan for the year of 2023, a sharp increase of 32% over the previous year. In the first quarter of this year, an increase of 26.3 billion yuan was added, an increase of 16.4% over the previous year, continuing the growth trend and supporting the continuous expansion of the company's business performance.

Leading the way in thermal power equipment, benefiting from the recovery of thermal power. The domestic share of the company's thermal power equipment is around 30-40%. In 2023, sales of main boiler/steam turbine/generator equipment increased 3%/30%/12% year on year, achieving revenue of 13.9 billion yuan, up 29% year on year, gross margin reached 23%. In the first quarter of '24, the company's power generation equipment output was 10.2041 million kilowatts, an increase of 63% year on year, with steam turbines contributing the main increase. The company's clean and efficient energy equipment orders increased 57% and 31% year-on-year in the first quarter of 2023 and 2024, and the thermal power equipment business is expected to continue its rapid growth rate.

The construction of pumped energy storage has been accelerated, creating a continuous driving force for growth. According to the Energy Administration's plan, 60/120GW pumping stations will be built separately by 2025/2030, and the next 5-10 years will be a large-scale construction period for pumped energy storage. In 2023, nearly 50 new domestic approved savings projects were added, with a capacity of 64.6 GW, maintaining a high level. Savings contracts account for 90% of the total hydropower equipment contract capacity of domestic enterprises. The company is the world's leading supplier of hydropower equipment and one of the two domestic pumping unit suppliers. Hydropower unit sales increased 88% year-on-year in 2023, and the hydropower equipment business is expected to rise rapidly. Considering the longer construction cycle of savings projects, the contribution to the growth of the storage business will be more sustainable.

Businesses such as nuclear power are also expected to contribute to growth. In the past two years, China has approved 10 units per year, and the pace of nuclear power construction has accelerated. In 2023, the company's nuclear power equipment revenue was 2.9 billion yuan, an increase of 41% over the previous year. At the same time, it received prototype development projects for new reactor types such as lead-bismuth reactors and cryogenic reactors, promoting technological reserve innovation, and the nuclear power business is expected to continue to contribute to growth. Furthermore, in 2023, the company won the bid for hydrogen vehicles and electrolytic hydrogen production projects. In fact, TEPCO began cultivating the hydrogen energy industry more than ten years ago, forming a complete layout of manufacturing, storage, transportation and application side, which is also expected to become a new growth point for the company in the future.

Investment advice: The company is a core supplier of clean power equipment, benefiting from the recovery of thermal power, while contributing to new growth such as pumping water and energy storage. It is predicted that the company will achieve net profit of 4.19 billion in 2024, maintaining a highly recommended rating.

Risk warning: Risk of policy adjustments, new business expansion falls short of expectations, and power investment falls short of expectations.