Incident: Recently, the company disclosed its 2024 interim report. In the first half of the year, the company achieved revenue of 34.808 billion yuan, a year-on-year increase of 12.38%; net profit to mother was 11.362 billion yuan, an increase of 27.92% over the previous year.

Comment:

Abundant incoming water has led to an increase in power generation. In the first half of the year, the total amount of incoming water from Wudongde Reservoir was about 36.66 billion cubic meters, an increase of 11.40% over the previous year; the total amount of incoming water from the Three Gorges Reservoir was about 147.941 billion cubic meters, an increase of 19.67% over the previous year. Driven by abundant incoming water, the company's power generation capacity has increased rapidly. In the first half of the year, the total power generation capacity of the company's six cascade power plants was about 120.618 billion kilowatt-hours, an increase of 16.86% over the previous year. Specifically, the Wudongde/Baihetan/Xiluodu/Xiangjiaba/Three Gorge/ Gezhouba power stations completed 138.19/220.21/256.20/14.363/36.211/8.585 billion kilowatt-hours respectively, an increase of 18.35%/3.43%/21.58%/10.91%/25.36%/16.98%, respectively.

Increased electricity capacity helped the company's performance grow rapidly. With the help of increased electricity capacity, the company's revenue increased 12.38% year on year in the first half of the year, net profit to mother increased 27.92% year on year, and performance grew rapidly. In the first half of the year, the company's financial expenses were 5.649 billion yuan, down 10.19% year on year, improving; R&D expenses were 0.226 billion yuan, up 76.99% year on year, mainly due to the company's increased investment in scientific research.

The pumped energy storage business is progressing in an orderly manner. In the first half of the year, the company fully took over the operation and maintenance of the Changlongshan Pumped Storage Power Station in Zhejiang. After handover, the unit achieved the “double zero” goal of zero unplanned shutdowns and safe production; the Zhejiang Tiantai Pumped Storage Power Station officially started preparations for electricity production; the Chongqing Fengjie Caishiba Pumped Storage Power Station completed investment decisions; and the Guanghanping Pumped Storage Power Station in Youxian County, Hunan completed equity transformation and investment decisions. Overall, the company is promoting the pumped energy storage business in an orderly manner.

PV installations have been further upgraded. In the first half of the year, the company implemented the main investment and operation responsibilities of the Jinxia base, took over the operation and maintenance of 4 new photovoltaic stations, and further upgraded the PV installed capacity. By the end of June 2024, the company had taken over the operation and maintenance of 21 photovoltaic stations, with a total installed capacity of nearly 2.65 million kilowatts.

International business is progressing steadily. The company continues to consolidate control over Peru's Luther Company, complete the merger and acquisition of Peru's Sapphire wind power project, and build a “generation, distribution and sale” industrial chain. Together with the Santa Teresa I hydropower plant and Arrow photovoltaic project, the company forms a pattern of complementary water and light, and source network load storage.

Investment advice: The company's EPS is expected to be 1.30 yuan, 1.38 yuan, and 1.45 yuan respectively in 2024-2026, and the corresponding PE will be 23 times, 21 times, and 20 times, respectively, maintaining the company's “buy” rating.

Risk warning: risk of incoming water fluctuations; economic development falling short of expectations; risk of feed-in tariff fluctuations; production safety risks, etc.