Description of the event

The company issued an announcement on the power generation capacity for the first half of 2024: in the first half of 2024, the company completed 46.695 billion kilowatt-hours of power generation, an increase of 12.15% over the previous year, and the feed-in electricity capacity was 46.272 billion kilowatt-hours, an increase of 12.36% over the previous year.

Incident comments

Incoming water has been significantly restored, and power generation has increased rapidly. Since the first half of 2024, incoming water has continued to be restored. Compared with the same period last year, incoming water from the Lancang River basin was about 30% higher, and the incoming water from the Wulonglong, Xiaowan, and Nuozadu sections were 30%, 31%, and 29%, respectively. In addition, the company actively coordinated the power grid to speed up the decline in pre-flood water levels. Driven by abundant incoming water and pre-flood decline, hydropower generation capacity achieved rapid growth. In the first half of the year, the company's hydropower generation capacity was 44.588 billion kilowatt-hours, an increase of 8.99% over the previous year. Among them, the completed hydropower generation capacity in the single second quarter was 29.463 billion kilowatt-hours, an increase of 24.09% year on year (data after retroactive adjustment). However, it should be noted that although incoming water from the Nuozhadu section was 29% higher in the first half of the year, power generation decreased by 12.34% year over year, and the power generation capacity of the Jinghong Power Station downstream from Nuozhadu also dropped by 10.44%. The main reason may be due to the increase in energy storage in Nuozhadu in the second quarter. The year-on-year decrease in electricity volume at Nuozhadu Power Station limited the increase in hydropower to a certain extent. In addition, under the combined influence of the increase in the installed scale of new energy and the favorable wind power photovoltaic power generation situation, new energy generation also achieved rapid growth. In the first half of the year, the company's wind power generation capacity was 0.271 billion kilowatt-hours, an increase of 5.45% over the previous year, and the photovoltaic power generation capacity was 1.836 billion kilowatt-hours, an increase of 290.64% over the previous year.

Volume and price have risen sharply, and the performance outlook for the first half of the year is excellent. In 2022, Yunnan Province promulgated the “Real-time Plan for the Market-based Reform of Coal-fired Power Generation in Yunnan Province” (trial), which proposes that the annual average electricity price for hydropower and electricity prices per month in Yunnan Province is formed within a range of 10% fluctuating up and down the average market price in the previous three years. As lower electricity prices are no longer included in rolling estimates in 2020, restrictions on electricity price increases in Yunnan Province will be released in 2024. Combined with the continuing tense situation of electricity supply and demand in Yunnan Province, it is expected that market-based electricity prices in Yunnan Province will rise year-on-year. Overall, the company's performance in the second quarter and the first half of the year is expected to accelerate, driven by strong support in both volume and price.

Toba has been put into production and storage capacity at a high level, and a high increase in annual performance can be expected. It is worth noting that in the first half of the year, incoming water from the Lancang River was abundant by about 30% year on year, but the year-on-year growth rate of power generation was only 12.15%, which means that the company still retains a large amount of stored water and is effective.

However, as we enter the peak electricity consumption period in the third quarter, it is expected that abundant storage capacity will be converted into stronger output, further catalyzing power generation in the second half of the year. Furthermore, according to the company's announcement, the first unit 1 (0.35 million kW) of the company's Toba Power Station officially entered commercial operation on June 15, and it is expected that all 1.4 million kilowatts of total installed capacity will be put into operation within the year. Therefore, in 2024, the company will receive strong support from the three dimensions of installed capacity, electricity volume, and electricity prices, and the company's annual performance outlook will maintain rapid growth.

Investment advice: According to the latest operating data, we adjusted the company's profit forecast. The company's 2024-2026 EPS is 0.52 yuan, 0.57 yuan and 0.64 yuan respectively, and the corresponding PE is 21.62 times, 20.01 times, and 17.74 times, respectively, maintaining a “buy” rating.

Risk warning

1. The risk of market electricity price fluctuations;

2. The risk of incoming water falling short of expectations.