occurrences

The company published its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 0.603 billion yuan, a year-on-year increase of 10.2%; net profit to mother was 2.302 billion yuan, an increase of 9.7% over the previous year.

Lai Shui is better than in the same period last year, and holding shares are making concerted efforts

On the holding side:

In the first half of 2024, incoming water from the watershed where the company controlled the hydropower company was located was better than in the same period last year. The cumulative power generation capacity was 1.891 billion kilowatt-hours, an increase of 18.11% over the previous year. In terms of hydropower construction, Yinjiang Hydropower Station 1 #、2 #机组进入安装阶段。 The company continues to expand the scale efficiency of new energy. In the first half of the year, it achieved the acquisition of 51% of Guangxi Yutian Nongguang Guangxi Rong'an Yuchai New Energy Co., Ltd.'s shares through public delisting. The controlling photovoltaic power generation company completed a total of 0.114 billion kilowatt-hours of power generation, an increase of 14% over the previous year. In addition, due to convertible debt-to-equity swaps and falling interest rates, the company's financial expenses fell by 31.4% year over year.

In terms of shareholding:

① Yalong River Hydropower: In 2024, Yalong River's hydropower generation capacity was 38.16 billion kilowatt-hours, up 9.4% year on year; of these, Q2 generated 18.53 billion kilowatt-hours, up 37.2% year on year. In 2024, the average feed-in price for H1 was 0.32 yuan/kilowatt-hour, down 1.9% year on year; of these, the average feed-in price for Q2 was 0.309 yuan/kilowatt-hour, down 9.7% year on year. The increase in power generation offset the structural decline in some electricity prices (the Yalong River received a sharp increase in power generation in June, but this portion of electricity enjoyed the electricity price during the flood season, which was relatively low). In the first half of the year, Yalong River Hydropower achieved operating income of 11.37 billion yuan, an increase of 3.2% over the previous year; of these, Q2 achieved revenue of 5.28 billion yuan, an increase of 6.5% over the previous year. In terms of profit, Yalong River Hydropower achieved net profit of 4.4 billion yuan in the first half of the year, an increase of 2.5% year on year; of these, Q2 net profit was about 1.832 billion yuan, a slight decrease of 0.1% year on year.

② Dadu River Hydropower: In 2024, the H1 National Energy Dadu River generated 19.68 billion kilowatt-hours, a year-on-year increase of 35.3%; of these, Q2 generated 13.38 billion kilowatt-hours, with a year-on-year growth rate of more than 70%. Rapid growth in power generation has led to increased profits. In 2024, H1 Dadu River achieved net profit of 0.84 billion yuan, a year-on-year increase of 65.8%. The return on investment in Sichuan Investment Energy increased by about 0.067 billion yuan over the same period last year.

The participating hydropower companies have sufficient reserves of power plants under construction and will contribute to future profit growth. Dadu River Hydropower Company: By the end of 2023, the Dadu River Basin has about 3.52 million kilowatt hydropower units, including Shuangjiangkou Hydropower Station, Jinchuan Hydropower Station, Zhoudou Dam Level 2, and Shaping Level 1 hydropower stations; Yalong River Hydropower Company: The Yalong River Basin Integrated Hydropower Station has been included in the national “14th Five-Year Plan” plan. The total scale of the base exceeds 0.1 billion kilowatts. The plan is 78 to 20 kilowatts of installed capacity. It was fully completed in 35 years. After the new units are put into operation by major participating hydropower companies, it will continue to contribute to the increase in investment income and drive the company's performance growth.

Profit forecast and valuation: The company is expected to achieve net profit of 5.08/5.36/5.56 billion yuan in 2024-2026, corresponding PE of 17.2/16.3/15.7x respectively, maintaining a “buy” rating.

Risk warning: incoming water fluctuates beyond expectations, declining electricity prices, macroeconomic performance falling short of expectations, electricity demand falling short of expectations, etc.