Description of the event
The company released its 2024 semi-annual report: in the first half of 2024, the company achieved revenue of 11.88 billion yuan, a year-on-year increase of 13.10%; net profit to mother was 4.169 billion yuan, an increase of 22.47% over the previous year.
Incident comments
The amount of incoming water converted to abundant electricity was restored, and business performance grew rapidly in the first half of the year. Since the first half of 2024, incoming water has continued to be restored. Compared with the same period last year, incoming water from the Lancang River basin was about 30% higher, and the incoming water from the Wulonglong, Xiaowan, and Nuozadu sections were 30%, 31%, and 29%, respectively. In addition, the company actively coordinated the power grid to speed up the decline in pre-flood water levels. Driven by abundant incoming water and pre-flood decline, hydropower generation capacity grew rapidly. In the first half of the year, the company's hydropower generation capacity was 44.588 billion kilowatt-hours, an increase of 8.99% over the previous year. However, it should be noted that although incoming water from the Nuozhadu section was 29% higher in the first half of the year, power generation decreased by 12.34% year over year, and the power generation capacity of the Jinghong Power Station downstream from Nuozhadu also dropped by 10.44%, mainly due to the increase in energy storage in Nuozadu in the second quarter. In addition, in the first half of the year, the company completed 0.271 billion kilowatt-hours of wind power generation, an increase of 5.45% over the previous year, and completed photovoltaic power generation of 1.836 billion kilowatt-hours, an increase of 290.64% over the previous year. Overall, the company's total power generation capacity was 46.695 billion kilowatt-hours, an increase of 12.15% over the previous year. The steady increase in electricity volume drove the company to achieve revenue of 11.88 billion yuan in the first half of the year, an increase of 13.10% over the previous year, slightly higher than the 12.15% growth rate of the company's electricity. It may mainly be due to the increase in the share of new energy electricity, while the price of affordable new energy electricity was higher than the impact of structural changes brought about by hydropower prices. Although the first half of the year saw changes in hydropower prices or were relatively limited, this was more an apparent result of structural changes due to the high increase in electricity during the flood season with seasonal low electricity prices. There was no fundamental change in the strong electricity price support logic brought about by tight supply and demand in Yunnan Province. However, in terms of cost, the natural properties of hydropower determined that the changes were relatively limited. In the first half of the year, the company's operating costs increased 9.52% year-on-year, which was lower than the increase on the revenue side. Furthermore, the company continued to optimize its financial structure. Financial expenses for the first half of the year were 1.338 billion yuan, a year-on-year decrease of 0.55%.
Therefore, overall, driven by steady growth in electricity volume, the company achieved net profit of 4.169 billion yuan in the first half of the year, an increase of 22.47% over the previous year.
The increase in the share of electricity prices during the flood season limited revenue growth, and flexibility in a single quarter narrowed. The company generated 29.463 billion kilowatt-hours of hydropower in the second quarter, an increase of 24.09% over the previous year (retrospectively adjusted data). Meanwhile, revenue for the second quarter was 7.461 billion yuan, up 19.61% year on year. The revenue growth rate for the second quarter was lower than the electricity growth rate. The main reason may be due to the significant increase in the share of electricity during the flood season when electricity prices were low. The company's operating costs for the second quarter were 2.734 billion yuan, up 18.34% year on year, close to revenue growth. Overall, driven by steady revenue growth, the company achieved net profit of 3.104 billion yuan in the second quarter, an increase of 24.37% over the previous year.
Toba has a high production capacity, and the annual performance outlook is positive. It is worth noting that in the first half of the year, incoming water from the Lancang River was abundant by about 30% year over year, but the company's power generation growth rate was only 12.15% year over year, which meant that the company still retained a large amount of stored water and did not contribute effectively. However, as we enter the peak electricity consumption period in the third quarter, it is expected that abundant storage capacity will be converted into stronger output, further catalyzing power generation in the second half of the year. Furthermore, according to the company's announcement, the first unit 1 (0.35 million kW) of the company's Toba Power Station officially entered commercial operation on June 15, and it is expected that all 1.4 million kilowatts of total installed capacity will be put into operation within the year. Therefore, the company will enjoy strong support from installed capacity and electricity volume in 2024, and the company's annual performance outlook will maintain steady growth.
Investment advice: According to the latest financial data, we expect the company's corresponding EPS in 2024-2026 to be 0.51 yuan, 0.56 yuan and 0.63 yuan, respectively, and the corresponding PE will be 21.35 times, 19.77 times, and 17.52 times, respectively. Maintain a “buy” rating.
Risk warning
1. The risk of market electricity price fluctuations;
2. The risk of incoming water falling short of expectations.