SDIC Electric Power released its 2024 semi-annual report. In the first half of the year, it achieved operating income of 27.102 billion yuan, +2.79% year over year; net profit to mother of 3.744 billion yuan, +12.19% year over year.

There was plenty of inflow, and performance increased steadily in the first half of the year. SDIC Electric released its 2024 semi-annual report. In the first half of the year, it achieved operating income of 27.102 billion yuan, +2.79% year over year; net profit to mother of 3.744 billion yuan, +12.19% year over year; of these, 2Q24 achieved operating income of 12.994 billion yuan, -0.89% year over year; and net profit to mother of 1.708 billion yuan, or -0.87% year on year.

Incoming water improved markedly in the second quarter, and the increase in electricity consumption during the flood season led to a drop in hydropower prices. The 2Q24 watershed where the company's main hydropower station is located has abundant incoming water, achieving a feed-in capacity of 21.755 billion kilowatt-hours, or +37.02% over the same period. Among them, the Yalong River hydropower feed-in capacity was 18.429 billion kilowatt-hours, or +37.38% over the same period last year. The sharp improvement in water since June has led to a significant increase in hydropower generation in the Yalong River, but this portion of electricity enjoyed relatively low electricity prices during the flood season, and the electricity price base for the same period last year was high, causing the Yalong River hydropower feed-in tariff to drop 9.65% year-on-year to 0.309 yuan/kilowatt-hour in Q2. In the first half of the year, Yalong River Hydropower achieved a net profit of 4.405 billion yuan, +2.55% year over year; the estimated net profit of kilowatt-hour was 0.116 yuan/kilowatt-hour, -0.008 yuan/kilowatt-hour year on year.

Coal prices have declined and new units have been put into operation, and thermal power performance has been further released. 2024H1's thermal power achieved 26.438 billion kilowatt-hours of feed-in electricity, +2.57% over the same period last year. Among them, the Fujian regional thermal power feed-in capacity was 10.092 billion kilowatt-hours, +20.8% over the same period last year, mainly benefiting from the increase in local social electricity consumption and the increase in electricity transmission.

The feed-in electricity capacity of Guangxi and Guizhou thermal power plants was 7.444 and 1.35 billion kilowatt-hours, respectively, compared with -4.5% and -11.2%, mainly due to abundant incoming water squeezing thermal power. Benefiting from the year-on-year decline in the unit price of imported standard coal, the net profit of the company's subsidiaries SDIC Jinneng, SDIC Meizhou Bay, and Huaxia Electric Power increased by 101.09%, 803.33%, and 257.86% year-on-year respectively; it is estimated that the net profit of the company's thermal power sector was 0.039 yuan/kilowatt-hour, +0.026 yuan/kilowatt-hour year on year. In December 2023 and April 2024, SDIC Qinzhou Erdian's two 0.66 million units were put into operation one after another, which is expected to continue to contribute to the increase in performance.

The amount of photovoltaic power has increased, and the increase in affordable projects has led to a decline in electricity prices. 2024H1's wind power and photovoltaics achieved feed-in power of 3.461 and 2.302 billion kilowatt-hours respectively, with year-on-year increases of 5.53% and 112.01%. With the increase in affordable projects, the company's wind power and photovoltaic feed-in electricity prices fell 3.85% and 30.82%, respectively, year on year in the first half of the year.

As of the end of June, the company's clean energy accounts for 68.53% of the installed capacity, of which new energy accounts for 17.75%. Since the company has not put any hydroelectric power units into operation recently, in order to achieve the target of 72% clean energy installed in the 14th Five-Year Plan, it is expected that the company will speed up production in 2024-2025.

Profit forecasting and valuation. The commissioning of the Liangyang Power Station continues to grow, and the amount of hydropower in Lishui Bianfeng Q3 is expected to continue to increase; coal prices are expected to remain low, and the company's thermal power profitability will be further restored; and relying on the Yalong River to lay out a comprehensive water and landscape energy base, new energy sources will continue to release performance. Maintain the company's 2024-2026 net profit forecast of 7.698, 8.501, and 9.559 billion yuan, with year-on-year increases of 14.8%, 10.4%, and 12.4%; current stock prices correspond to PE at 15.7x, 14.2x, and 12.6x, respectively, maintaining the “increase” rating.

Risk warning: Incoming water falls short of expectations, coal costs are higher than expected, feed-in tariffs fluctuate, and progress of new energy projects is lagging behind.