Incident: The company achieved operating income of 20.121 billion yuan in the first half of 2024, a year-on-year decrease of 0.85%; net profit to mother was 1.327 billion yuan, up 65.72% year on year; net profit after deducting non-return to mother was 1.316 billion yuan, up 71.08% year on year; basic EPS was 0.4166 yuan/share, up 64.14% year on year.

Comment: Gross margin increased month-on-month, and performance was in line with expectations. Mainly due to a decrease in power generation, the company achieved revenue of 9.513 billion yuan in 24Q2, down 4.41% and 10.33%, respectively. However, it is expected to benefit from lower fuel costs, achieve gross profit margin of 26.80%, increase 1.49 and 1.1 pcts, respectively, and achieve gross profit of 2.549 billion yuan, up 1.70% year on year and 6.48% month on month. In terms of expenses, it mainly benefited from the 5.83% year-on-year decrease in management expenses, and the year-on-year decrease of 0.09pct to 14.69% during the period. In addition, it mainly benefited from a 45.03% increase in investment income. The company's 24Q2 operating profit/total profit/net profit/net profit to mother increased by 18.94%/19.13%/20.52%/48.83%/54.56% year-on-year, respectively. Among them, net profit to mother/net profit without return to mother increased 9.36%/7.03% month-on-month, respectively, to 0.693/0.68 billion, which is basically in line with the median performance forecast.

The amount of coal and wind power generation decreased month-on-month, and feed-in electricity prices remained basically flat month-on-month. In 24H1, the company completed a consolidated power generation capacity of 35.882 billion kilowatt-hours, up 1.98% year on year. Among them, coal power completed 23.911 billion kilowatt-hours, down 2.39% year on year, gas and electricity completed 3.959 billion kilowatt-hours, up 36.03% year on year, wind power completed 5.031 billion kilowatt-hours, down 0.36% year on year, and photovoltaic power generation completed 2.981 billion kilowatt-hours, up 9.22% year on year, of which 24Q2 coal/gas/wind power/ PV power generation increased by -4.75%/25.64%/-18.19%/13.00% year-on-year, respectively, and -11.20%/-23.18%/-29.92%/46.77% month-on-month, respectively. In addition, the 24H1 market settles 23.24 billion kilowatt-hours of electricity, of which 15.783 billion kilowatt-hours for direct supply transactions, 0.322 billion kilowatt-hours for electricity transactions across provinces and regions, 7.113 billion kilowatt-hours for power grid purchases, 0.022 billion kilowatt-hours for spot transactions; the average price of 24Q1 and 24H1 feed-in tariffs (tax included) is 0.61 yuan/kilowatt-hour.

The installed capacity at home and abroad continues to grow. As of the end of 24H1, the company's controlled installed capacity was 22.6919 million kilowatts, of which 9.848 million kilowatts of coal power accounted for 43.40%, gas and electricity 3.6202 million kilowatts, accounting for 15.95%, wind power 3.8661 million kilowatts, accounting for 17.04%, and photovoltaic power generation of 5.3576 million kilowatts, accounting for 23.61%. This year, construction of 0.4 million kilowatt wind power projects in Longnan and Wuwei in Gansu started; Hungary's 0.2 million kW Tokaj photovoltaic project was connected to the grid; the comprehensive smart zero-carbon power plant project in Ibaraki City, Japan was connected to the grid; and construction of the Rixos Hotel PV project in Turkey began. Additionally, the company's two coal-fired power projects totaling 4 million kilowatts or will be put into operation around the end of 2026.

Profit forecast: In 2024-2026, the company is expected to achieve operating income of 42.47/42.519/42.572 billion yuan and net profit to mother of 2.269/2.53/2.725 billion yuan, corresponding to PE 10.47/9.38/8.71 times PE. Covered for the first time, a “gain” rating was given.

Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, fuel costs have fallen short of expectations, utilization hours and electricity prices have fallen short of expectations, and profit forecasts and valuation models have fallen short of expectations.