Incidents:

On August 22, 2024, China Electric Power released its 2024 mid-year report: In the first half of 2024, the company achieved revenue of 26.47 billion yuan, +24.18% year-on-year, and realized net profit of 2.57 billion yuan to mother, +52.98% year-on-year. (Note: Unless otherwise specified, the unit in this article is RMB) Dividend: 2024H1 plans to pay a special dividend of 0.05 yuan/share (before tax), with a total amount of approximately RMB 0.619 billion, accounting for 24.1% of 2024H1's net profit to mother.

Investment highlights:

The performance of various sectors was outstanding, and 2024H1's net profit to mother was +53.0% year-on-year.

2024H1's net profit to mother was +53.0%. Among them, net profit for thermal power/wind power/photovoltaics was 1.11/1.96/1.14 billion yuan, +97.2%/+34.9%/+46.5%, respectively, the net profit of hydropower was 0.77 billion yuan, and 2023H1 was -0.15 billion yuan, turning a year-on-year loss into a profit.

The decline in coal prices led to a year-on-year improvement in thermal power performance. The net profit of 2024H1's thermal power sector was 1.108 billion yuan, a sharp increase of 97.2% over the previous year. Net profit per kilowatt hour was 3.9 points/degree, +1.9 points/degree year over year, mainly because the decline in coal prices drove the company's average fuel cost per unit of thermal power -8.0% to 0.274 yuan/degree, a decrease of 2.4 cents/degree. The 2024H1 company's coal and electricity price was 0.392 yuan/kilowatt hour, -1.05 cents/kilowatt hour, mainly due to the drop in fuel prices and the drop in spot electricity prices in Shanxi Province.

2024H1 Hydropower turned a year-on-year loss into a profit, and the third quarter results are expected to continue to improve. The net profit of 2024H1's hydropower sector was 0.77 billion yuan, 2023H1 was -0.15 billion yuan, net profit was 7.2 cents/degree, and 2023H1 was -2.6 points/degree. The net profit of the performance turned into a profit mainly of +89.85% of electricity sales compared to the same period last year. In July 2024, the company's hydropower generation capacity was +197% year-on-year, and continued to grow strongly. The company's Q3 hydropower performance can be expected to increase.

The performance of 2024H1 has increased significantly, and 3.3 GW of clean energy has been added to the installed capacity. 2024H1's wind/photovoltaic net profit was +34.9%/+46.5% YoY, mainly wind power/photovoltaic sales volume +57.5%/+96.7% YoY (the company's self-built projects were put into operation in 2023 and the Group's new energy assets were injected). 2024H1's net profit for wind power/photovoltaic power was 0.149 yuan/degree and 0.096 yuan/degree, respectively, -2.5/-3.3 points/degree year-on-year. Mainly due to factors such as an increase in affordable grid-connected projects, the electricity revenue was -3.0/ -1.8 cents/degree year-on-year. 2024H1 Clean Energy added 3.3 GW of installed capacity.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 49.4/53.4/58 billion yuan, and net profit to mother will be 5/6/6.7 billion yuan, respectively, and the corresponding PE will be 8/7/6 times. Looking ahead to the second half of 2024, hydropower performance is expected to continue to recover, and green power installations are expected to further contribute to growth and maintain a “buy” rating.

Risk warning: Policy progress falls short of expectations; new installed capacity falls short of expectations; sharp rise in coal prices; reduction in electricity prices; dry water supply; increased industry competition; risk of depreciation, etc.