1H24 returns to mother net profit yoy +27%, maintaining profit forecast and target price

Funeng Co., Ltd. released its semi-annual report. 1H24 achieved revenue of 6.665 billion yuan (yoy +4.6%), net profit due to mother of 1.188 billion yuan (yoy +27%), deducting non-net profit of 1.167 billion yuan (yoy +26%). Among them, 2Q24 achieved revenue of 3.577 billion yuan (yoy +8.3%, qoq +15.8%), net profit to mother 0.662 billion yuan (yoy +65%, qoq +26%), deducting non-net profit of 0.644 billion yuan (yoy +61%, qoq +23%). Maintaining the profit forecast, we expect the company's net profit to be 3/3.2/3.48 billion yuan for 24-26, corresponding to an EPS of 1.16/1.24/1.35 yuan. The target PE of 11x for 24 years was given. Among them, thermal power and the other 12xPE (profit share 38%) are consistent with the comparable average of thermal power generation; 11xPE of new energy (62% profit share) is consistent with the comparable average of new energy power generation. Maintain the target price of $12.76. The company's reserve projects are diversified, with a target of 15/20 GW for manual installation in 2025/2030. Maintain a “buy” rating.

The net profit of 1H24 New Energy was divided year on year. The wind situation determined the profit trend towards 5.99 GW of total installed capacity of the holding as of the end of June 2024, of which 1.81 GW of wind power. The total installed capacity and structure did not change from the beginning of the year. Referring to the progress of the project under construction, it is expected that the company's installed capacity will remain stable in '24. The incoming wind situation is the core factor affecting the company's new energy generation. In the first half of 2024, the wind situation in Fujian was reduced and then improved. 1Q24/2Q24, the company's wind power generation capacity was -10%/+20% year-on-year, of which -5%/+22% offshore and -16%/+17% onshore. The net profit of the new energy subsidiary 1H24 was divided year on year, with Funeng New Energy -10%, Funeng Strait +30%, and Strait Power Generation +11%. If wind conditions continue to improve year-on-year in the second half of the year, the profit of the new energy subsidiary is expected to increase significantly.

The year-on-year improvement in 1H24 thermal power net profit is expected to continue to benefit from the year-on-year decline in coal prices 1Q24/2Q24, the company's thermal power generation capacity was +8%/+0% year-on-year. Among them, cogeneration stopped falling and rebounded (-20%/+8%), coal-fired power generation fell to a high level (+20%/-14%), and gas and electricity growth slowed (+57%/+3%). 1H24 Hongshan Thermal Power's net profit was +14% year over year, and Funeng Guidian +134% year over year, thanks to the year-on-year decline in coal prices and other revenue increases; the company's cogeneration and coal-fired power generation profits are still expected to benefit from the year-on-year decline in coal prices in the second half of the year. The net loss of gas and electricity in Jinjiang narrowed to 0.023 billion yuan in 1H24, mainly due to the year-on-year increase in revenue from alternative electricity.

Diversification of reserve projects. In 2025/2030, with a manual installation target of 15/20GW, the company currently reserves diversified power generation installed projects, including a total of 4.0 GW (magnolia drawing+Huashan drawing+Dongtian savings), 1.32 GW of thermal power (Dongqiao Thermoelectric Phase I), and 0.65 GW of offshore wind power (Changle J Zone has been approved); the company is actively seeking 1.32GW of Dongqiao Thermal Power Phase II and the Jinjiang Gas and Electricity Phase II project to participate in the development of offshore wind power project configurations and promote the replacement of large and small onshore wind turbines Upgrading projects. The company aims to reach 15/20 GW of in-hand power generation installations (holding operation and construction) by the end of 2025/2030, respectively.

Risk warning: Wind power project construction progress falls short of expectations; electricity/coal prices fall short of expectations.