Description of the event

The company released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 118.806 billion yuan, a year-on-year decrease of 5.73%; realized net profit to mother of 7.454 billion yuan, an increase of 18.16% over the previous year.

Incident comments

Thermal power profits continued to recover year on year, and the decline in electricity volume limited the increase in performance. In the first half of 2024, due to major hydropower generation, the company's coal machines completed feed-in electricity consumption of 170.4 billion kilowatt-hours, a year-on-year decrease of 3.19%; combustion engines completed feed-in electricity of 12.334 billion kilowatt-hours, a year-on-year decrease of 4.14%. In terms of electricity prices, the company's average feed-in tariff for domestic power plants in the first half of the year was 498.70 yuan/megawatt-hour, a year-on-year decrease of 3.21%. Although there is some pressure on the volume and price of the thermal power business, the significant decline in fuel costs caused thermal power profits to continue to recover. In the first half of the year, the unit price of the company's tax-free standard coal was RMB 1,010.32 yuan/ton, a year-on-year decrease of 11.20%. Therefore, in the first half of the year, the company's domestic coal and power business still achieved a total profit of 3.98 billion yuan, an increase of 571% over the previous year, and the total profit of combustion engines was 0.57 billion yuan, an increase of 63% over the previous year. Looking at a single quarter, heavy hydropower output in the second quarter suppressed the amount of thermal power. The company's coal power feed-in capacity was 78.133 billion kilowatt-hours, a year-on-year decrease of 9.65%. At the same time, due to seasonal factors at the end of the heating season in the second quarter, heating demand weakened, and electricity volume also fell 15.32% month-on-month; the feed-in capacity of gas engines was 5.18 billion kilowatt-hours, a year-on-year decrease of 7.28%. However, thanks to the year-on-year decline in coal prices, the company's coal and electricity business profit in the second quarter still reached 1.155 billion yuan, up 74.21% year on year. The total profit from coal power generation was 0.015 yuan/kilowatt-hour, up 0.007 yuan/kilowatt-hour, but the month-on-month decline was mainly due to seasonal temperature factors and high hydropower generation combined to limit the amount of coal electricity. Furthermore, the decrease in heat supply in the second quarter increased seasonal fluctuations in the performance. We believe that the month-on-month decline in thermal power profits should not be extrapolated linearly. As the third quarter enters the peak thermal power output season, electricity volume is expected to grow month-on-month, and the second quarter of last year had a high base effect due to weak hydropower, but the high base effect in the third quarter has weakened, so the year-on-year pressure on electricity is also expected to decrease marginally.

Weak wind power limited performance, and overseas profits returned to normal. In the first half of 2024, due to poor wind and lighting conditions, the company's wind turbines used 1,200 hours, a decrease of 53 hours over the previous year; the solar generator usage time was 594 hours, a decrease of 14 hours over the previous year. However, driven by new installations, the company's wind power feed-in capacity was 18.88 billion kilowatt-hours, an increase of 12.53% over the previous year; the PV completed feed-in capacity of 8.198 billion kilowatt-hours, an increase of 74.24% over the previous year. Benefiting from this, the company's wind power achieved a total profit of 4.03 billion yuan in the first half of the year, an increase of 0.2% over the previous year; total PV profit reached 1.245 billion yuan, an increase of 24% over the previous year. Looking at a single quarter, the incoming wind situation in the second quarter was relatively weak. Wind power feed-in power increased by only 1.8% year on year, while photovoltaic feed-in power increased by 74.57% year on year. Affected by weak wind power business performance, wind power achieved a total profit of 1.616 billion yuan in the second quarter, a year-on-year decrease of 23.01%; while PV realized a total profit of 0.875 billion yuan, an increase of 33.18% over the previous year.

In terms of overseas business, Dashi Energy's electricity price base was high last year due to tight supply and demand in Singapore, and its operating performance returned to normal this year. As a result, the total profit from the Singapore business in the first half of the year was 1.724 billion yuan, down 40.35% from the previous year. Overall, thanks to significant cost recovery, the company achieved a return of 7.454 billion yuan in the first half of the year, an increase of 18.16% over the previous year; however, due to the drag of wind power and Dashi Energy in the second quarter, it achieved a return to mother of 2.858 billion yuan, a year-on-year decrease of 29.58%.

Investment advice: According to the company's latest financial data, the company's EPS is expected to be 0.79 yuan, 0.91 yuan and 1.01 yuan respectively in 2024-2026, corresponding to PE 9.79 times, 8.49 times, and 7.70 times, respectively. Maintain the company's “buy” rating.

Risk warning

1. There is a risk that electricity supply and demand will deteriorate;

2. There is an unseasonal risk in coal prices.