Key points of investment:
Incident: 1) The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 4.83 billion yuan, a year-on-year increase of 16.25%, and achieved net profit to mother of 1.437 billion yuan, an increase of 57.40% over the previous year, in line with our expectations. 2) The company announced a profit distribution plan for the semi-year 2024. It plans to distribute a cash dividend of 0.85 yuan (tax included) for every 10 shares, with an estimated dividend amount of 0.67 billion yuan, accounting for 46.61% of 1H24's net profit attributable to shareholders of listed companies.
Incoming water has improved dramatically, and the increase in electricity consumption has led to an increase in performance. 1H24 completed 17.579 billion kilowatt-hours of power generation, up 19.48% year on year, of which hydropower generation capacity was 14.397 billion kilowatt-hours, up 27.05% year on year. The high increase in hydropower generation was mainly due to the high year-on-year increase in incoming water from the Hongshui River Basin where the company's backbone power plants are located, and the year-on-year increase in incoming water from areas with hydropower stations located in Guizhou, Sichuan and Yunnan. The company's hydropower marketization ratio is low. In 2021, Guangxi abolished a number of hydropower profit reduction policies, such as a 10% reduction in hydropower prices during the peak period, which is expected to further guarantee the company's electricity price level in the context of abundant incoming water and falling market-based electricity prices. 1H24's gross profit on hydropower increased by 51.32% to 1.924 billion yuan. Among them, the net profit of the two major hydroelectronics companies, Longtan Hydropower and Datang Yantan, increased by 81.94% and 64.94% year-on-year to 0.646 billion yuan and 0.251 billion yuan, respectively. 1H24's thermal power generation capacity was 1.627 billion kilowatt-hours, a year-on-year decrease of 25.09%. The decline in electricity volume was mainly due to abundant incoming water squeezing the thermal power generation space. The thermal power cost side fell by 28.69% year on year, supporting the thermal power division's profit to 0.024 billion yuan year on year.
New energy sources are growing rapidly, creating the second pillar of performance. By the end of June 2024, the company's wind power and photovoltaic installed capacity had increased by 0.0564 and 0.2193 million kilowatts respectively to 0.8481 and 0.8838 million kilowatts compared to the end of 2023, and the share of new energy installations further increased to 13.02%. The high increase in installed capacity led to a rapid increase in power generation. 1H24's wind power and photovoltaic power generation capacity was 1.159 and 0.396 billion kilowatt-hours, respectively, up 14.87% and 97.75% year on year, driving the company's gross profit of wind power and photovoltaics to increase 17.66% and 7.86% year on year to 0.335 and 0.05 billion yuan respectively. The company continues to lay out the new energy business. According to the company's announcement, the company plans to invest in the construction of several new energy power generation projects in the near future, including the 115MW Xiaoping solar photovoltaic project and the 200MW Gaodeling wind farm project. The company's new energy installed capacity is expected to continue to grow.
The balance and liability structure has been optimized, and financial expenses have been reduced. The company continued to optimize its balance and liability structure. As of the end of the first half of 2024, the company's balance ratio was 53.31%, down 2.05 pcts from the end of 2023. In the case where LPR was lowered three times in a row in June of last year, February of this year, and July of this year, 1H24's comprehensive financing cost ratio fell to 2.6%, driving the company's financial expenses down 3.46% year on year to 0.277 billion yuan, further enhancing the company's performance.
Profit forecast and valuation: Considering the company's incoming water situation and new energy business expansion, we maintain the company's 2024-2025 net profit forecast of 3.045 and 3.201 billion yuan, respectively, and add the 2026 net profit forecast of 3.459 billion yuan. The PE corresponding to the current stock price is 17, 17, and 15 times, respectively, maintaining a “buy” rating.
Risk warning: incoming water falls short of expectations, and the progress of new energy projects falls short of expectations.