Description of the event

The company issued a positive profit forecast: In the first half of 2024, the company is expected to achieve profits attributable to equity holders of 2.68 billion yuan to 2.87 billion yuan, an increase of 45% to 55% over the previous year.

Incident comments

Driven by high hydropower generation combined with the injection of assets, the recovery of performance in the first half of the year accelerated. From January to May, the company completed total electricity sales volume of 52.445 billion kilowatt-hours, up 32.70% year on year. Among them, thanks to abundant incoming water in the basin where the company's hydropower plant is located, hydropower sales reached 8.035 billion kilowatt-hours in January-May, an increase of 85.20% year on year. The hydropower business model determined that its cost did not change much. High electricity generation will drive the company's hydropower performance to maintain a high increase; wind power sales reached 11.139 billion kilowatt-hours, an increase of 52.62% year on year, and photovoltaic electricity sales reached 9.349 Million kilowatt-hours, an increase of 92.86% over the previous year. The clean energy project acquired by the company in 2023 also shows that the installed scale of new energy increased by 9.0428 million kilowatts. The rapid expansion of the installed capacity has driven the excellent performance of new energy power generation, and the company's clean energy generation profit is expected to increase dramatically. Overall, improvements in incoming water led to a significant restoration of hydropower and electricity. Combined with the increase in performance brought about by the injection of new energy assets, the company's clean energy sector performed excellently.

Cost pressure continues to be released, and thermal power's performance is steady. In January-May, the company's thermal power sector sold 23.174 billion kilowatt-hours of electricity, an increase of 2.90% over the previous year. Under the impact of large hydropower generation, thermal power generation still achieved steady growth. In terms of cost, thanks to the continuous optimization of the coal supply and demand environment since this year, coal prices have continued to fall. From January to June, the average market price of Q5500 thermal coal in China's Qinhuangdao Port was 874.88 yuan/ton, down 14.4% from the previous year. Even considering the smoothness of Changxie Coal, the company's thermal power cost pressure is still expected to be significantly released. Steady growth in electricity volume is compounded by continued recovery on the cost side, and the thermal power sector is expected to achieve steady performance. Overall, under the combined influence of excellent clean energy performance and steady thermal power performance, the company expects to achieve profits attributable to equity holders of 2.68 billion yuan to 2.87 billion yuan in the first half of the year, an increase of 45% to 55% over 2023. At the same time, the company's articles of association promise a 50% bottom line dividend, and the company's dividend rate in 2023 is as high as 61.38%. The accelerated recovery of the company's operating performance will translate into rich dividend returns for the company's shareholders, further enhancing the company's excellent investment value.

The “14th Five-Year Plan” is ambitious, and the company has entered a period of rapid growth. The company previously proposed a strategic target of over 90% of the installed clean energy in 2025. Assuming that the company will only retain 8 million kilowatts of coal power at the end of 2025, the company will still need to add more than 38 million kilowatts of clean energy installed in 2024-2025, and the company acquired 9.2683 million kilowatts of new energy assets in the first half of 2023, once again demonstrating the company's dominant position as the Group's new energy platform. As the world's largest clean energy power generation group, in the context of the State Assets Administration Commission encouraging mergers, acquisitions and restructuring of central enterprises, the Group's asset securitization is expected to accelerate in the future. We continue to be optimistic about the value increase and investment opportunities brought about by the rapid growth of the company's new energy business during the “14th Five-Year Plan” period.

Investment advice: We expect the 2024-2026 results to be 5.004 billion, 6.046 billion yuan, and 7.157 billion yuan, respectively, corresponding EPS of 0.40 yuan, 0.49 yuan, and 0.58 yuan, respectively, and the corresponding PE is 8.66 times, 7.16 times, and 6.05 times, respectively.

Maintain the company's “buy” rating.

Risk warning

1. The risk that the progress and benefits of the commissioning of new construction projects fall short of expectations;

2. Wind conditions and lighting resources fall short of expected risks.