Industrial energy efficiency revenue increased steadily, and the company's revenue and net profit to mother grew. With 2024H1, the company achieved operating income of 1.323 billion yuan (+1.57%), net profit due to mother 0.205 billion yuan (+5.29%), and net profit not attributable to mother of 0.199 billion yuan (+4.88%). The main reason for the year-on-year increase in the company's operating income and net profit due to the continuous increase in the scale of distributed photovoltaic installations and the steady increase in the company's industrial energy efficiency revenue. By business segment, 2024H1, the company's industrial energy saving business revenue is 0.69 billion yuan (+14.00%), of which distributed photovoltaic business revenue is 0.563 billion yuan (+12.71%), building energy efficiency business revenue is 0.411 billion yuan (-1.52%), and comprehensive resource utilization business revenue is 0.154 billion yuan (-21.58%).

The company is vigorously expanding its decentralized wind power business to form new performance growth points. In recent years, national policies have promoted the development of decentralized wind power. In April 2024, the National Development and Reform Commission, the National Energy Administration and the Ministry of Agriculture and Rural Affairs jointly issued the “Notice on Organizing and Carrying Out the “Wind Management Action for Thousands of Villages”, which clearly states that during the “14th Five-Year Plan” period, rural areas in eligible counties (cities, districts, flags) will be selected to build a number of wind power projects developed and used locally, using villages as units. Each administrative village will not exceed 20MW. Driven by national policy support, the company has vigorously promoted the development of decentralized wind power business. The joint venture established by the company and Guangxi Power Grid Corporation has been established and operated, and has achieved remarkable results in using territorial resources to promote decentralized wind power business development. As of June 2024, it had operated 0.08 million kilowatts of wind power projects, and achieved decentralized wind power business revenue of 0.021 billion yuan in the first half of 2024.

The biomass business exited in an orderly manner, and the impact of the biomass business on the company's performance is expected to gradually weaken in the future. The company strictly implements the “one plant, one policy” operation plan for biomass power plants, and takes more measures to promote project loss reduction and strategic adjustment and exit. Operating losses in the biomass comprehensive utilization business segment have been reduced. In the first half of 2024, the company's biomass comprehensive utilization business achieved operating income of 0.039 billion yuan (-53.01%). However, the company's biomass projects are still facing greater operating pressure and financial pressure, and operating efficiency is low. In the future, the company will further investigate and realistically adjust biomass project exit strategies and arrangements, and effectively implement the board of directors's strategic plan to “resolutely withdraw from unfavorable areas”.

Risk warning: distributed photovoltaic projects fall short of expectations; electricity prices have declined; market competition has intensified.

Investment advice: Due to the reduction in the company's biomass renewable energy subsidies and the decline in the number of hours distributed photovoltaics used, profit forecasts were lowered. The estimated net profit for 2024-2026 is 0.319/0.587/0.654 billion yuan (the original forecast value was 0.575/0.757/0.925 billion yuan), with a year-on-year growth rate of 2.8%/83.8%/11.5%; the 2024-2026 EPS is 0.08/0.15/0.17 yuan, respectively, and the PE corresponding to the current stock price is 47.9/26.1/23.4x, respectively. Maintain an “better than the market” rating.