Description of the event

The company released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 5.215 billion yuan, a year-on-year decrease of 8.33%; net profit to mother was 0.229 billion yuan, an increase of 631.74% over the previous year.

Incident comments

The operation of the main power industry was significantly restored, and business performance grew rapidly in the first half of the year. In the first half of 2024, thanks to the restoration of incoming water, the company's self-generating capacity reached 1.271 billion kilowatt-hours, an increase of 48.55% over the previous year. Although demand weakened, the company's electricity sales reached 6.626 billion kilowatt-hours in the first half of the year, a decrease of 1.47% over the previous year, but due to the increase in the share of self-generated power generation, the company's main electricity business continued to improve. In terms of electricity prices, the average price of electricity sold by the company in the first half of 2024 was 0.491 yuan/kilowatt-hour (excluding tax), an increase of 0.61% over the previous year. Furthermore, the average price of electricity purchased from outside the company also achieved a year-on-year decline. As a result, the company's electricity business achieved operating profit of 0.31 billion yuan in the first half of the year, an increase of 160.43% over the previous year due to the widening of the price spread of electricity purchases and sales and the increase in the share of self-generated power generation with high gross profit.

The comprehensive energy business grew rapidly, and depreciation and the electrolytic manganese business dragged down performance. In the first half of 2024, thanks to the gradual release of the profitability of integrated energy projects such as energy storage power plants and electric heavy truck charging, switching and storage integration, the Jiulongyuan Cogeneration Project in the Wanzhou Economic Development Zone achieved profits through continuous production. The company's comprehensive energy business achieved operating profit of 50.95 million yuan, an increase of 36.34% over the previous year. In addition, the company's agricultural network transferred self-deferred revenue from government subsidies, immigration relocation compensation, rural small hydropower efficiency expansion and renovation subsidies, etc. into current income; at the same time, investment income from joint ventures such as Tiantai Energy, Shaanxi, Chongqing, and Lingang was confirmed. The company's other income and investment income reached 44.48 million yuan and 37.23 million yuan respectively, all of which contributed positively to the performance. In terms of profit reduction factors, due to the reduction in the scale of trade business, the decline in the market price of electrolytic manganese, and the decline in production capacity utilization, etc., the manganese industry and trade profit experienced large losses in the current period. The loss amount of the electrolytic manganese business reached 63.93 million yuan in the first half of the year, and the loss amount increased 61.28% year on year; profit and loss due to changes in fair value was 18.12 million yuan, which also dragged down overall performance to a certain extent. Overall, however, driven by significant improvements in the operating performance of the main power business and comprehensive energy business, the company achieved net profit of 0.229 billion yuan in the first half of the year, an increase of 631.74% over the previous year.

Focus on moving forward, and there is plenty of room for long-term growth. Currently, the company has sufficient projects: 1) In terms of combustion engines, the 0.49 million kilowatt Chongqing municipal key project - Yongchuan District cogeneration project was completed and put into operation; construction of the Fuling Baitao 0.49 million kilowatt gas cogeneration project began; the Wanzhou Economic Development Zone 0.49 million kilowatt gas gas power generation project accelerated preliminary work; 2) The comprehensive energy business is progressing steadily. Currently, the company still has BOT turnkey construction for the 2x135 megawatt waste gas resources comprehensive utilization project. The million kilowatt cogeneration phase II project, the Chongqing Liangjiang Cooperative Innovation Zone distributed energy station (phase II) project with an investment of 0.116 billion yuan and the natural gas distributed energy project of the Liangjiang Branch of Chongqing Ninth People's Hospital are expected to be put into operation within the year; 3) The new energy business is developing rapidly. The network's Wuxi Changgui (Phase I) 36 MW agricultural and solar complementary photovoltaic power generation project and the 24.61 MW centralized photovoltaic power generation project in Wuling and Yudu in Wanzhou are expected to be put into operation within the year. Therefore, the company's rich on-going projects will become an important source to guarantee the company's long-term growth, and the company's growth attributes are still stable.

Investment advice: According to the latest financial data, we adjusted the company's profit forecast. The company's EPS for 2024-2026 is 0.39 yuan, 0.45 yuan, and 0.57 yuan, corresponding PE is 17.79 times, 15.44 times, and 12.17 times, respectively, maintaining a “buy” rating.

Risk warning

1. Incoming water falls short of the expected risk;

2. The expansion of the project falls short of the expected risk.