Guangxi hydropower faucets have significantly improved their incoming water restoration performance. Guiguan Electric Power is the leading hydropower operator in Guangxi Province. The actual controllers are China Datang Group (51.55% as of 24Q1), and Guangzhou Investment Group holds 22.3% of the shares. In addition, Changjiang Electric Power has increased its holdings several times since 2019, with a total shareholding of 10.7%. By the end of '23, the installed capacity of the company had reached 13.02 million kilowatts, of which power supplies in Guangxi Province accounted for 87.6%; the company's water/fire/wind/light installed capacity was 1024/1.33/0.79/0.66 million kilowatts, respectively. In 2023, the company's revenue was 8.09 billion yuan, YOY -23.9%; net profit to mother was 1.23 billion yuan, YOY -61.8%. The company released a performance forecast. The net profit for 24H1 is expected to be 1.387-1.487 billion yuan, YOY +51.9%-62.9%, mainly due to incoming water restoration, and YOY +27% of hydropower generation.

Focusing on Hongshui River's core hydropower assets, hydropower performance is expected to improve in 24 years. 1. The Hongshui River is the company's core hydropower development basin. The company owns six of the Hongshui River Class 10 power plants, with a total installed capacity of 8.47 million kilowatts. Another 1.76 million kilowatt hydropower installations are distributed in other watersheds such as the Yandu River. 2. Affected by the depletion of water over the past 23 years, the company's hydropower generation volume/total profit YOY -41.5%/-68.1%. The estimated hydroelectric energy revenue is 0.228 yuan/kilowatt, YOY +1.4%, and the electricity profit is 0.063 yuan/kilowatt hour, YOY -45.3%. 3. If water returns to a multi-year average of 3122 hours over the past 24 years, it is estimated that the company's hydropower profit is expected to reach 3.5 billion yuan, an increase of 2.18 billion yuan over the previous year.

4. The company's reserve projects include 3.6 million kilowatts for the Songta Power Station, 1.4 million kilowatts for the Longtan Phase II, and 0.34 million kilowatts for the Badu Power Station. Depreciation of the hydropower units that have already been put into operation will also drive down costs and expand the profit margin for hydropower.

Coal prices are declining, and thermal power profits are expected to recover. 1. As of '23, the company's thermal power installations reached 1.33 million kilowatts, all belonging to the Guangxi Heshan Thermal Power Plant. 2. In '23, the company's thermal power revenue was 2.062 billion yuan, YOY +45.64%, total thermal power profit was -0.15 billion yuan, and in '22 it was -0.27 billion yuan. The estimated revenue of coal-fired power generation is 0.455 yuan/kilowatt, YOY -0.08%, and electricity profit -0.033 yuan/kilowatt hour (-0.087 yuan/kilowatt hour in 22 years). 3. Assuming that the comprehensive coal price falls by 100 yuan/ton throughout the year, we expect the company's total thermal power profit to reach 0.04 billion yuan, an increase of 0.19 billion yuan over the previous year.

New energy construction continues to gain strength, and profitability and growth can be expected. 1. In recent years, the company has focused on deploying new energy in Guangxi, Shandong, Guizhou and other places. The total installed wind power/photovoltaic capacity in 2023 was 0.79/0.66 million kilowatts, respectively. 2. It is estimated that the company's wind power/photovoltaic power revenue is 0.516/0.367 yuan/kilowatt hour, YOY -2.3%/-7.0%, and the electricity profit is 0.176/0.159 yuan/kilowatt hour. 3. Assuming that the 24-26 project will be put into operation about 0.6 million kilowatts per year, the company's new energy business is expected to develop steadily and healthily.

Profit forecasting and valuation. We expect the company to be 0.39/0.43/0.45 in 24-26 years. Comparable to the company's 24-year average PE 20 times. The company announced that the 24-year dividend ratio was not less than 70%. The cash flow stability and dividend ratio were close to large hydropower, and a valuation premium could be given. The company could be given 20-22 times PE in 24 years, corresponding to a reasonable value range of 7.8-8.58 yuan. The first coverage was superior to the market rating.

Risk warning. Incoming water fell short of expectations, profits from coal and electricity fell short of expectations, and fluctuations in landscape revenue affected the company's performance.