Description of the event

The company announced its 2024 interim results: Profit attributable to company owners (net profit) of HK$9.363 billion in the first half of 2024, an increase of 38.9% compared with net profit of HK$6.74 billion in the first half of 2023.

Incident comments

Coal prices have declined steadily, and thermal power performance has improved markedly. In the first half of 2024, the company sold 72.147 billion kilowatt-hours of electricity, up 3.4% year on year. In terms of electricity prices, the first half of the year was affected by falling coal prices and the year-on-year decline in thermal power prices in Guangdong Province. The average feed-in price of coal-fired power plants affiliated to the company fell 3.0% year on year. Affected by this, the company's thermal power generation revenue in the first half of the year was 30.54 billion yuan, a slight decrease of 0.48% year on year. In terms of cost, in the first half of the year, the unit price of the company's converted coal was 934.6 yuan/ton, down 10.6% year on year. The average unit fuel cost was 276.5 yuan/megawatt-hour, down 10.7% year on year. Thanks to the significant release of cost side pressure, the company's core business profit in the thermal power sector in the first half of the year was HK$2.715 billion, an increase of 273.86% year on year. The profit of the coal-fired power core business was HK$0.0376 per kilowatt-hour, which is significantly ahead of central enterprises, highlighting the excellent profitability of the company's thermal power assets. Furthermore, thanks to the acquisition of the Guangxi Hezhou project, which achieved additional revenue of HK$0.876 billion, the thermal power division's performance was further enhanced. Although there was also an asset impairment effect of HK$11.27 million, the company's thermal power still achieved profit attributable to the company's owners of HK$3.58 billion, an increase of 416.85% over the previous year.

Weak resources limit landscape performance, and renewable energy business profits are under slight pressure. By the end of the first half of 2024, the company's wind power equity installed capacity was 19.123 million kilowatts, and the PV equity installed capacity was 5.002 million kilowatts, up 14.63% and 148.98%, respectively. Due to incoming wind and poor lighting, the number of hours the company used wind power in the first half of the year was 1,223 hours, a decrease of 9.54% year on year; the number of hours used by photovoltaics was 705 hours, a decrease of 3.69% year on year. Due to the number of hours of poor use of wind power, wind power sales in the first half of the year were 22.388 billion kilowatt-hours, an increase of 6.9% year on year; photovoltaic electricity sales were 3.149 billion kilowatt-hours, an increase of 204.9% year on year. Due to the grid connection and marketability of affordable projects, the average feed-in price of the company's wind power project without tax fell 1.9% year on year in the first half of the year, but the company's wind power price performance was already quite rigid among comparable companies. As a result, the company's renewable energy power generation business revenue in the first half of the year was 11.96 billion yuan, an increase of 8.97% year on year. Due to declining utilization hours and pressure on electricity prices, the installed growth rate of renewable energy projects was greater than revenue growth, and the share of wind power was relatively high. As a result, the company's renewable energy division achieved core business profit of HK$5.556 billion in the first half of the year, a decrease of 6.69% over the previous year, but as the wind power base declined in the third quarter, subsequent pressure may ease. Overall, although the profitability of the renewable energy business of weak companies was under pressure, thanks to the excellent profit level of the thermal power business, the company achieved core business profit attributable to owners of HK$8.271 billion in the first half of the year, an increase of 23.81% over the previous year; achieving business profit attributable to the company's owners of HK$9.363 billion, an increase of 38.9% over the previous year.

Rapid expansion ensures growth, and steady dividends show value. The company expects capital expenditure to reach HK$59.9 billion in 2024, of which approximately HK$46.6 billion will be used for new energy construction, and plans to add 10 million kilowatts of installed capacity for wind power and photovoltaic projects in 2024. The rapid expansion of new energy assets will ensure the steady growth of the company's performance. The company also stated that it will pay an interim dividend of HK$0.455 per share, an increase of 38.7% over the previous year, continuing the company's steady dividend attributes and demonstrating the company's excellent investment value and sincerity.

Investment advice and valuation: Without considering the return of new energy to the A listing, the 2024-2026 results are expected to be 15.419 billion, 16.729 billion and HK$18.195 billion, respectively. The corresponding EPS is HK$3.21, 3.48 and 3.78, respectively, and the corresponding PE is 6.61 times, 6.10 times and 5.60 times, respectively. Maintain the company's “buy” rating.

Risk warning

1. The risk that the progress and benefits of the commissioning of new construction projects fall short of expectations;

2. Wind conditions and lighting resources fall short of expected risks.