Incidents:

The company released its 2024 semi-annual report. In the first half of the year, the company achieved operating income of 1.853 billion yuan, an increase of 38.83% year on year; net profit to mother 0.568 billion yuan, up 83.47% year on year; net profit after deducting non-return to mother 0.553 billion yuan, an increase of 97.34% year on year.

The peak period for wind power production has arrived, and performance has increased dramatically:

The high increase in the company's performance in the first half of the year was mainly due to an increase in power generation capacity and a sharp drop in cost rates due to the commissioning of the company's new wind power projects. Since 2023, the company has ushered in the peak period of commissioning of new energy projects. Yongning Wind Farm and Jianshuitang Liangzi Wind Farm were connected to the grid in the second half of 2023, contributing to increased performance in the first half of this year. In the first half of 2024, the company's power generation capacity was 2.467 billion kilowatt-hours, up 127.07% year on year; the electricity sector achieved revenue of 0.77 billion yuan, up 77.08% year on year, and gross margin increased 6.18 pcts year on year. As the first phase of the Admiralty Wind Farm (0.3 million kilowatts) was connected to the grid at full capacity on June 30 this year, by the end of June 2024, the company had put into operation a total installed capacity of 1.876 million kilowatts of new energy, a significant increase over the same period last year. At the same time, the company has a geographical advantage. The profitability of high-quality wind resource guarantee projects in Yunnan Province reached 1591.66 hours in the first half of 2024, 40% higher than the national average of 1,134 hours. High-quality resource endowments guarantee the profitability of the project to a certain extent. In addition, the company's sales and management expenses ratio decreased by 2.77 pct and 3.22 pct respectively in the first half of the year. Expense control and the increase in the share of new energy business led the company's overall net interest rate to 30.12%, an increase of 7.36 pcts over the previous year.

There are enough active projects+the Group has injected expectations, and growth over the next few years is certain:

In March 2023, Yunnan Province issued the “Notice on Certain Policies and Measures to Accelerate Photovoltaic Power Generation”, which requires ensuring that the scale of new energy development is at least 15 million kilowatts per year. The company is expected to benefit as a provincial enterprise under the vigorous promotion of new energy development policies. According to our statistics, as of the end of June 2024, the company's wind turbines under construction and approval reached 0.79 million kilowatts. Of these, the Jinzhong Wind Farm Phase II project (0.12 million kilowatts) is expected to be put into operation within this year, which will further drive performance growth in the second half of the year. According to the company's plan, the target is to reach 5.13 million kilowatts of new energy installed by the end of the “14th Five-Year Plan”. The company is the only new energy operating platform under the Yunnan Investment Group. It has signed an agreement with the Yunnan Energy Investment Group to avoid competition in the industry. Future new projects within the group will not rule out the possibility that new projects will be injected into listed companies, leading to continued growth in long-term new energy installations. At present, the Group has signed a cultivation agreement with the company for the 1.189 million kilowatt photovoltaic project, which is expected to be injected during the “14th Five-Year Plan” period.

The salt industry is stable, and the natural gas business can be expected to recover:

The company's salt sector was generally stable. In the first half of the year, salt and nitrate products achieved revenue of 0.554 billion yuan, down 2.35% year on year. Among them, table salt business revenue was 0.317 billion yuan, up 5.94% year on year, mainly benefiting from a 21.78% increase in sales in the first half of the year; the net profit of the company's salt subsidiary Yunnan Salt Industry Co., Ltd. was 82.2352 million yuan in the first half of the year, up 10.16% year on year. The company's natural gas business is still in a period of cultivation and growth. Downstream customers are still in the process of vigorous development. As fixed costs such as depreciation and the commissioning of pipelines increased, the natural gas subsidiary lost 46.3903 million yuan in the first half of the year, the company's shareholding ratio was 52.51%, and the mother lost 24.3595 million yuan. However, judging from the gas volume situation, the company's gas sales volume in the first half of the year was 0.2 billion square meters, an increase of 102% over the same period last year. With the rapid rise in gas volume, the natural gas business is expected to gradually reduce losses.

Investment advice:

Without considering group asset injection, the company's revenue for 2024-2026 is expected to be 3.792 billion yuan, 4.311 billion yuan, and 4.95 billion yuan, respectively, with growth rates of 30.6%, 13.7%, and 14.8% respectively, and net profit of 0.79 billion yuan, 0.93 billion yuan, and 1.08 billion yuan, respectively. The growth rates are 63.8%, 18.2%, and 15.7%, respectively. Maintain the buy-A investment rating and give 2024 At 15xPE per year, the target price for 6 months is 12.9 yuan.

Risk warning: Project commissioning progress falls short of expectations, utilization hours of new energy projects fall short of expectations, risk of falling prices of salt industry products.