1H24 shareholders' net profit fell 0.6% year on year

FY24's interim results were mixed. Revenue in the first half of the year increased 20.8% year on year to 12.14 billion yuan (RMB, same below), mainly due to the 33.9% year-on-year increase in natural gas sector revenue to 8.88 billion yuan, benefiting from a 46.5% year-on-year increase in natural gas sales to 3.02 billion cubic meters. However, revenue from the new energy sector fell 4.6% year on year to 3.26 billion yuan, mainly due to poor wind resources in the first half of the year, wind power generation fell 3.6% year on year to 7,444 gigawatt-hours, and average utilization hours fell 9.6% year on year to 1,212 hours.

Since the profit margin of the new energy sector was much higher than that of the natural gas sector (1H24, the profit margin after tax was 35.7%, the latter was 5.1%), the net profit of shareholders in the first half of the year ultimately fell 0.6% year on year to 1.43 billion yuan.

Wind power installed capacity continues to grow

In the first half of the year, the company added 268 megawatts of wind power installed capacity, and the cumulative installed capacity of wind power increased 4.4% year-on-year to 6,358 megawatts.

The company maintains FY24's annual target of adding 800-1,000 megawatts of installed capacity. Taking into account wind resources and installed capacity, we expect FY24 wind power generation to drop slightly by 0.3% year over year to 14,036 GWH, but FY25-26 will increase 15.2% and 18.8% respectively to 16,171 GWh and 19,212 GWH, respectively.

Tangshan LNG Project Phase II construction went smoothly

The second phase of the Tangshan LNG project continues to advance. A total of 96.8% of the 1, 2, 5, and 6 storage tank projects were completed, and 81.7% of the 9, 10, 15, and 16 storage tank projects were completed. Among them, tanks No. 2 and No. 6 will be delivered to Ganghua Smart Energy (1083 HK) for use, while the rest of the tanks will be used by the company itself. We expect the second phase to be put into operation on FY25 as scheduled to help expand the company's natural gas business. We expect the company's FY24-26 gas sales to increase by 34.3%, 18.2%, and 10.3% year-on-year to 6.05 billion, 7.15 billion, and 7.89 billion cubic meters, respectively.

Maintain a “buy” rating

Referring to FY24's interim results, we lowered FY24-26 shareholders' net profit forecasts by 8.6%, 9.2%, and 6.4% respectively, and adjusted the target price for H shares from HK$4.15 to HK$4.02, corresponding to 5.5 times the FY25 price-earnings ratio and 24.4% upside. Maintain a “buy” rating.

Risk warning: (1) risk of accounts receivable, (2) sharp drop in grid-connected electricity prices, and (3) rising natural gas costs.