Brief performance review

On the evening of August 30, the company disclosed its 24-year report. 1H24 achieved revenue of 1.32 billion yuan, +1.6% YoY; net profit to mother of 0.21 billion yuan, +5.3% YoY. Among them, Q2 achieved revenue of 0.75 billion yuan, or -0.99% year-on-year; realized net profit of 0.12 billion yuan to mother, +2.2% year-on-year.

Management analysis

Losses in the biomass power generation business have been reduced, and subsidy checks have been implemented. 1H24 comprehensive resource utilization business revenue was -21.6% YoY, and gross margin +4.3pct YoY. The decline in revenue and increase in gross margin were mainly due to biomass projects adopting a “minimized operation” strategy to reduce losses; some agricultural and solar complementary projects were affected by electricity restrictions. Furthermore, the official operation of the decentralized wind power business led to an increase in performance. According to the announcement, the total amount of renewable energy subsidy funds for biomass power generation projects that have been confirmed to be compliant is 0.34 billion yuan. Currently, it has received a total of 0.11 billion yuan. The progress of inspection and implementation and subsidy disbursement is expected to accelerate. At the same time, according to the inspection results, the subsidy amount needs to be reduced by 0.24 billion yuan, which is estimated to have an impact of 0.21 billion yuan on the return to mother in '24.

1H24 Heavy rain in South China led to a decrease in the number of hours used by photovoltaics and a decline in gross margin. As of 1H24's PV installed capacity of 2.446 million kilowatts (industrial and commercial distributed 210+ agricultural and solar complementary 34.6), the first half of the year added 0.226 million kilowatts (industrial and commercial distributed 23.4, agricultural and solar complementary no new additions). The increase in installed capacity contributed +12.7% to the revenue of the 1H24 industrial and commercial distributed business year over year, but due to weather factors, a decrease in the number of hours used, and gross margin of -3.9 pct year over year.

The scale of 1H24's proposed investment has increased significantly. According to the announcement, 1H24 plans to invest a total of 0.582 million kilowatts of installed capacity in photovoltaic projects, which is +102.8% compared with the same period last year. Installation costs have decreased due to falling prices of photovoltaic equipment, freeing up more roof resources that meet yield expectations.

Profit Forecasts, Valuations, and Ratings

Considering the results of the subsidy verification, we expect the company to achieve net profit of 0.48/0.69/0.81 billion yuan and EPS of 0.13/0.18/0.21 yuan respectively from 2024 to 2026. The corresponding PE is 32 times, 22 times, and 19 times, respectively, maintaining a “buy” rating.

Risk warning

Risks that new distributed photovoltaic installations fall short of expectations; risk of biomass fuel cost fluctuation, subsidy arrears or reductions, continuing to drag down performance; risk of declining demand for urban energy-saving businesses, etc.