1H24 net profit yoy -11% to mother, lower profit forecast/maintain target price

Three Gorges Energy released its semi-annual report. 1H24 achieved revenue of 15.1 billion yuan (yoy +10%), net profit to mother of 4.039 billion yuan (yoy -11%), deducting non-net profit of 4.038 billion yuan (yoy -8.6%). Of these, 2Q24 achieved revenue of 7.2 billion yuan (yoy +4.5%) and net profit of 1.617 billion yuan (yoy -23%) to mother. Depreciation and operating costs increased, production safety charges, and feed-in tariffs fell, and gross profit margin was lowered; accounts receivable for green electricity subsidies were extended, and credit impairment losses were raised; new project shareholding ratios were reduced and minority shareholders' equity ratios were lowered; profit forecasts were lowered, and net profit to mother is expected to be 7.2/8.9/10.3 billion yuan for 24-26 (previous value 9/10.8/12.4 billion yuan), EPS 0.25/0.31/0.36, and 25-26 CAGR = 20%. The green power industry is under overall pressure in 24, and profit margins are expected to bottom out and rebound. We believe that the 25-year valuation can better reflect medium- to long-term value. Comparable to the company's 25-year PEG average of 1.0x (Wind agreed), gave the company 1.0xPEG for 25 years, maintaining a target price of 6.20 yuan and a “buy” rating.

Maintaining the leading position of offshore wind power, the scale of construction and reserve projects is impressive. As of the end of June, the company put into operation 41.37 GW of installed capacity, an increase of 1.33 GW compared to the beginning of the year; of these, 5.69 GW of ocean wind and 13.94 GW of land wind and 20.58 GW of photovoltaics, an increase of 195/13/758 MW compared to the beginning of the year. Judging from the company's various installed capacity accounts for the national share, ocean wind 14.9%, land wind 3.3%, and photovoltaics 2.9%, and the company maintains the leading position of domestic offshore wind power. As of the end of June, the company was constructing 23.48 GW of installed capacity, including 5.51 GW of wind power, 13.35 GW of photovoltaics, 3.60 GW of storage, and 1.02 GW of independent energy storage. 1H24 added a total of 1.44 GW of new approved or registered installations, including 0.20 GW of wind power and 1.24 GW of photovoltaics.

Wind power generation efficiency is superior to the national average, and the net profit of 1H24 fell sharply year on year, yoy +29% to 36.1 billion degrees; among them, wind power yoy +12% to 23.1 billion degrees, using hours yoy-0.8 to 1,243 hours, 109 hours higher than the national average; photovoltaic power generation YOY +73% to 12.6 billion degrees, and the number of hours used yoy -1.7% to 693 hours, 67 hours higher than the national average. 1H24's average feed-in electricity price yoy -14% to 429 yuan/MWh, of which wind power yoy -8% to 456 yuan/MWh, photovoltaic yoy -26% to 372 yuan/MWh, affected by structural factors and market-based transactions; electricity cost YOY -6% to 190 yuan/MWh, of which wind power yoy +8% to 204 yuan/MWh, PV yoy -33% to 157 yuan/MWh; wind power net profit yoy -18% to 146 yuan/MWh, of which wind power yoy -15% to 146 yuan/MWh MWH, PV YOY -16% to 115 yuan/MWh.

The green power subsidy accounts receivable period was extended, and the profit and loss ratio of minority shareholders rose to 42.2 billion yuan by the end of June, up 17% from the beginning of the year, which was higher than the year-on-year revenue growth rate; the company prepared bad debts according to the account age combination, and the account period for receiving green power subsidies was extended, resulting in a 1H24 credit impairment loss of +46% to 0.435 billion yuan. The minority shareholders' profit and loss of 1H24 was +36% to 0.792 billion yuan, and the minority equity ratio was yoy+5pp to 16.4%. Mainly, the shareholding ratio of some of the company's new projects was lower than that of existing projects.

Risk warning: The risk of declining utilization hours, falling short of expectations on projects under construction, and lagging green power subsidies.