Brief performance review

On the evening of August 28, the company disclosed its 24 annual report results. The company achieved revenue of 1.85 billion yuan in 1H24, +38.8% year-on-year; realized net profit of 5.7 yuan to mother, +83.5% year-on-year.

Among them, Q2 achieved revenue of 0.88 billion yuan, +32.7% year-on-year; net profit to mother of 0.21 billion yuan, or +67.1% year-on-year. Actual results are close to the upper limit of the previous forecast.

Management analysis

Due to multiple factors, 1H24's new energy sector performed well. Electricity volume in the 1H24 new energy sector increased by 127.1%, revenue increased by 75.9% (revenue growth was slower than electricity growth, mainly because electricity prices for affordable projects were lower than those with stock subsidies), and net profit to mother increased by about 113% (estimated value). Many factors contributed: (1) Installed capacity: 1H24 Yongning Wind Farm, Jianshuitang Liangzi Wind Farm, and Golden Bell Phase I 0.3 million kilowatt fans were connected to the grid one after another to contribute to the increase in installed capacity; (2) Number of hours used: 1H24's wind energy resource endowment advantages were highlighted, and the comprehensive average utilization hours of stock and incremental wind power was 1591.66 hours, 40% higher than the national average; (3) Market spillover electricity prices: 0.0114 yuan/kWh (4) environmental (4) Price: 1H24 achieved a breakthrough in the company's green license transaction. The transaction amount was 8.37 million yuan; (5) Test operation revenue: The gross margin of 1H24 wind power reached 77.1% (+5.97pct compared to the previous year), and the revenue from the trial operation stage of some projects was included in the current profit and loss.

The core drivers have long-term logic. The company's Golden Bell Phase II and several expansion projects are yet to be gradually implemented; the advantages of seasonal complementarity between peak wind power and hydropower output in Yunnan, and the scarcity of wind power installations in Yunnan are expected to continue to be reflected in better market-based electricity prices; the 24-year renewable energy consumption weight notice mentions that “the consumption ratio of electrolytic aluminum green electricity in Yunnan is not less than 70%”.

The salt business reduced costs and increased efficiency, and natural gas sales doubled. 1H24 salt nitrate business revenue -2.4% YoY (industrial salt drag), gross margin +1.4pct year over year; natural gas business revenue +67.8% YoY, gross margin -4.5 pct YoY (gas sales increased, but branch line transformation still brought cost pressure). The combined net profit of the two major businesses in 1H24 remained flat year-on-year, waiting for the natural gas sector to reverse its losses.

Profit Forecasts, Valuations, and Ratings

We expect the company to achieve net profit of 0.8/0.92/1.07 billion yuan from 2024 to 2026, and EPS of 0.87/0.99/1.16 yuan, respectively. The corresponding PE is 12 times, 11 times, and 9 times, respectively, maintaining a “buy” rating.

Risk warning

Risk of electricity demand falling short of expectations; risk of changes in electricity price policy in Yunnan Province; risk of PV installations impacting market-based electricity prices in Yunnan Province; risk that the Group's photovoltaic asset injection falls short of expectations; risk that the salt industry and natural gas business fall short of expectations, etc.