Incident: 2024H1, the company achieved operating income of 0.6035 billion yuan, up 10.24% year on year; realized net profit of 2.302 billion yuan, up 9.74% year on year; weighted ROE was 5.77%, down 0.15 pct from the same period last year; basic EPS was 0.4771 yuan, up 1.44% year on year.

In the 2024Q2 single quarter, the company achieved operating income of 0.346 billion yuan, up 16.41% year on year and 34.05% month on month; realized net profit of 1.029 billion yuan, up 7.01% year on year, down 19.14% month on month; operating cost 0.191 billion yuan, up 9.81% year on year and 32.67% month on month.

The incoming water situation in the watershed was better than last year, and the volume and price of hydropower showed a steady rise in volume and price. 2024H1, the incoming water from the watershed where the company controlled the hydropower company was located was better than in the same period last year. The total feed-in electricity volume was 1.973 billion kilowatt-hours, an increase of 18% over the previous year. Among them, hydropower/photovoltaic feed-in electricity was 1.86/0.113 billion kilowatt-hours, up 18.25%/14.14% year on year; 2024Q2, the company's total feed-in power was 1.203 billion kilowatt-hours, up 23.26% year on year. Among them, hydropower/photovoltaic feed-in electricity was 1.121/0.082 billion kilowatt-hours, an increase of 22.11%/41.38% year-on-year.

2024H1, the company's average feed-in tariff was 0.257 yuan/kilowatt-hour, a year-on-year decrease of 4.46%. Among them, the average feed-in price for hydropower/photovoltaics was 0.241/0.517 (including state subsidies) yuan/kilowatt-hour, a year-on-year decrease of 2.03%/17.81%. Hydropower prices fluctuated slightly due to changes in pricing methods, and PV electricity prices lowered overall electricity prices due to the commissioning of affordable projects.

The profit of the main business increased, and Yalong River Hydropower continued to contribute revenue. 2024H1, a subsidiary of Chuantou Electric Power, achieved net profit of 41.6766 million yuan, an increase of 225.78% over the previous year. The company's overall operating costs increased by 11.452 million yuan over the same period last year, mainly due to the addition of the holding subsidiary Guangxi Rong'an Yuchai New Energy Co., Ltd. Affected by convertible debt-to-equity swaps and declining interest rates, financial expenses decreased by 0.099 billion yuan (-31.37%) year on year in the first half of the year, and operating cash flow increased by 0.131 billion yuan (+69.62%) year on year. The company's operating conditions were good.

2024H1, the company's investment income was 2.412 billion yuan, a year-on-year increase of 0.112 billion yuan (+4.88%). Among them, the investment income of Yalong River Hydropower, which holds 48% of the shares, is 2.113 billion yuan, the investment income of Daduhe Company, which holds 20% of the shares, is 0.147 billion yuan, and the investment income of CNNC Huineng, which holds 6.4% of the shares, is 0.099 billion yuan.

Investment advice: The incoming water from the watershed in the first half of the year was better than in the same period last year, improving the profitability of the company's shareholding companies.

Combined with the tight balance between electricity supply and demand in Sichuan Province and channel construction, electricity prices for hydropower are expected to rise steadily. The company is expected to achieve operating income of 1.659, 1.841, and 1.909 billion yuan in 2024-2026, and net profit to mother of 5.041, 5.377, and 5.679 billion yuan, with year-on-year increases of 14.6%, 6.7%, and 5.6%. The corresponding EPS is 1.03, 1.10, and 1.17 yuan, and the corresponding PE is 17.5X, 16.4X, and 15.5X, maintaining the “gain” rating.

Risk warning: Incoming water falls short of expectations, the risk of electricity prices falling beyond expectations, natural disasters, electricity demand falling short of expectations, uncertain risks brought about by the implementation of relevant policies, and the new project process falling short of expectations.