Thermal power surpassed expectations in the first half of the year, but was offset by the low utilization rate of new energy sources. Core profit for the first half of the year increased by 23.8% year-on-year, better than our forecast of 10.7%, mainly because the company's thermal power division's profit was higher than our expectations. During the period, the net profit of the company's thermal power/new energy division was +75%/-12%. The management explained that it was affected by both the reduction in usage hours and electricity prices. The utilization hours of wind and light projects fell 9.5%/3.7% year-on-year in the first half of the year, respectively, and feed-in electricity prices fell 1.9%/11.8%, respectively, resulting in a profit impact of about HK$0.9-1 billion. In terms of thermal power management, fuel costs fell 10.7% year on year in the first half of the year, and the ignition price difference improved 18% year on year to 0.142 yuan per kilowatt hour.

There is a plan to use the acquisition to meet the target of additional installed capacity during the year and lower the hourly utilization forecast. In the first half of this year, the company added a total of about 0.93 gigawatts of wind power and photovoltaics connected to the grid, which is still a certain distance from our estimated annual target of 8 gigawatts. Management added that by the end of July, the new grid connection volume had exceeded 1.1 gigawatts. Furthermore, in the second half of the year, we will continue to actively study the acquisition of wind/light projects, so we are still maintaining the company's forecast of 4 gigawatts of new wind/light grids this year. Furthermore, the company's wind power/photovoltaic power limit for the first half of the year was 4.95%/5.85% (+2.0/ +4.7 percentage points year on year). Management said that the country has attached great importance to consumption issues and is confident that it will have more active promotion policies to strengthen cross-provincial transmission and green power consumption in the future. Currently, we estimate that the company's wind/light utilization hours will decrease by 5%/4% year over year in 2024.

The increase in the electricity limit rate is already broadly reflected, and the progress of the acquisition will support the increase in valuation. We lowered the company's 2024/25 profit forecast by 16.7%/7.0% to reflect the low hourly energy use situation in the first half of the year. Among them, we lowered our forecast for new energy generation by 5%. Despite this, we expect the company's profit per share to grow 17% year over year in 2024. We lowered our target price to HK$26.83 (previously HK$27.55) to reflect the lower profit and maintain our buy rating. We believe that the company's current valuation broadly reflects expectations for an increase in the electricity limit rate. Future valuation increases will depend on operating conditions and the progress of project acquisitions.