Incidents:

On August 27, 2024, China Resources Power released its 2024 annual report: 2024H1 achieved revenue of HK$51.12 billion, -0.7% YoY; net profit to mother of HK$9.36 billion, +38.9% YoY.

Dividends: The company plans to pay an interim dividend of HK$0.455 per share, totaling HK$2.189 billion, accounting for 23.4% of 2024H1 net profit to mother.

Investment highlights:

2024H1's net profit to mother was +38.9% YoY. First, the net profit from the thermal power sector was HK$3.58 billion, up 417% from HK$0.69 billion in 2023H1 (including confirmed revenue of HK$0.876 billion from the acquisition of the Hezhou Thermal Power Project in Guangxi). Second, net profit from the renewable energy business was +5.8% to HK$5.49 billion.

The decline in coal prices led to a marked year-on-year recovery in thermal power performance. 2024H1 Thermal Power's net profit to mother was HK$3.58 billion. Excluding acquisition proceeds and impairment, net profit to mother was HK$2.71 billion, and net profit per kilowatt hour (HKD) was 3.8 points/degree (HKD) compared to the previous year, mainly because the unit price of imported standard coal was RMB 935 per ton, or -10.6% year-on-year. Furthermore, the average feed-in price of 2024H1 thermal power was -3% year-on-year; feed-in power volume was +3.4% year-on-year, mainly due to the commissioning of 0.97 GW thermal power equity installation in 2023.

2024H1 renewable energy added 2.1 GW of installed capacity. 2024H1's renewable energy business achieved net profit of HK$5.49 billion, +5.8% year over year. First, because 2024H1 only depreciated HK$0.06 billion, while 2023H1 depreciated HK$0.76 billion. Second, new energy projects put into operation in 2023 contributed profit, and 2024H1 renewable energy sales volume +14.6% year over year. Without taking into account impairment, the 2024H1 renewable energy electricity net profit is HK$0.213 per kilowatt hour, compared to HK$0.049. We think one is that wind power prices are -1.9% year over year (increase in new affordable projects, etc.), and the other is -9.5%/-3.7% year-on-year ratio of wind power/photovoltaic utilization hours. 2024H1 wind power/photovoltaics added 0.5/1.56GW will be put into operation, for a total of 2.1 GW. The 2024 plan is to add 10 GW of installed wind power, and a large number of projects will be connected to the grid in the second half of this year.

Profit forecast and investment rating: Considering the sharp year-on-year recovery in the company's 2024H1 thermal power performance, we raised our profit forecast. We expect the company's revenue for 2024-2026 to be HK$104.6/111/116.5 billion, respectively, and net profit to mother of HK$14.9/17/18.8 billion, respectively, and the corresponding PE is 6/6/5X. Looking ahead to the second half of 2024, the company's green power installations are expected to further contribute to growth and maintain a “buy” rating.

Risk warning: Policy progress falls short of expectations; new installed capacity falls short of expectations; coal prices have risen sharply; electricity prices have been lowered; industry competition has intensified; the abandonment rate has increased beyond expectations; risk of impairment, etc.