1H24 results are in line with our expectations

The company announced 1H24 results: revenue of 12.14 billion yuan, +20.8% YoY; net profit to mother of 1.43 billion yuan, -1% YoY, corresponding to earnings of 0.34 yuan per share, which is in line with our expectations.

In terms of wind power business, 1H24 holds a wind farm with a power generation capacity of 7.444 billion kilowatt-hours, -3.6% year over year. The average usage time is 1212 hours, or -128 hours year on year, mainly due to the year-on-year decrease in wind speed.

By the end of 1H24, the company held 6.36 GW of installed capacity and 610 MW of installed capacity under construction.

In terms of natural gas business, 1H24's cumulative gas sales volume was 3.02 billion square meters, +46% year over year. Mainly due to the commissioning of the Tangshan LNG terminal, LNG sales volume increased sharply to 0.691 billion square meters year on year.

Development trends

The scale of capital expenditure may remain high for 2-3 years. 1H24's capital expenditure is 2.53 billion yuan, -42.5% YoY. Looking ahead, considering that the company has many wind power projects planned and under construction, we determine that the capital expenditure scale of the company's wind power business may increase from about 2 billion yuan in 2023 to 6-7 billion yuan/year, driving the company's overall capital expenditure to 8-10 billion yuan/year.

Strengthen capacity building for energy storage and peak shifting. With the increase in the domestic landscape installed capacity, we believe that the importance of energy storage and peak shifting facilities in ensuring the stability of the yield of new energy power generation projects will be further demonstrated. As of 1H24, 10 units of the Fengning Pumped Storage Power Plant, in which the company holds 20% of its shares, have been connected to the grid. Looking ahead, we judge that the company will further step up efforts to build capacity building for energy storage and peak shifting, lay out compressed air energy storage, gas peak-shifting power plants, electrochemical energy storage and other related assets to guarantee the return on the company's new energy projects.

Innovate business models to improve the profitability of Tangshan LNG Terminal. Considering the company's current long-term contract implementation situation (1 million tons/year) and international LNG spot supply and demand relationships, we believe that it may be difficult to guarantee that the load rate of the Tangshan LNG terminal will reach a high level in 2024-2025.

Looking ahead, we judge that the company will guarantee stable profits at the Tangshan LNG terminal by providing new business models such as providing storage tank leasing to the outside world, opening a window period, and providing proxy gas storage services.

Profit forecasting and valuation

The profit forecast for 2024 and 2025 remains unchanged. The current A share price corresponds to 2024/2025 11.6x/9.9x P/E. The current H share price corresponds to 2024/2025 4.9x/4.1x P/E. A-shares maintained an outperforming industry rating, but due to the downward shift in the A-share industry valuation center, we lowered our target price by 20% to 8.00 yuan, corresponding to 13.6x/11.6x P/E in 2024/2025, with 16.5% upside compared to the current stock price. H shares maintained an outperforming industry rating and a target price of HK$3.50, corresponding to 5.4/4.4x P/E in 2024/2025, with 8.4% upside compared to the current share price.

risks

LNG spot prices have risen sharply, and wind speeds have fallen short of expectations.