1H24 net profit to mother +12.2% year-on-year, and the net profit from coal, electricity and electricity may reach the 4 branch's 1H24 operating income/3.744 billion yuan, +2.8%/+12.2% year-on-year; 2Q24 achieved revenue/net profit to mother of 12.994/1.708 billion yuan, or -0.9% year-on-year. The year-on-year increase in the company's net profit to mother in the first half of the year was mainly due to a decline in coal prices, a sharp increase in thermal power profit. 1H24's net profit from coal and electricity may have reached 4 points; the slight year-on-year decline in net profit due to a slight year-on-year decline in net profit from new energy sources in 2Q24. To reduce the future profit of new energy sources, we adjusted the company's net profit to mother for 24-26 to 7.9/9/9.7 billion yuan (previous value: 8.5/9.7/10.4 billion yuan). Based on 24E thermal power net assets/clean energy net profit of 6.251/6.826 billion yuan, with reference to the coal-power/clean energy comparable company 24E PB/peWind's consistent forecast of 1.02/20.8x, considering that the company's clean energy profit was partially contributed by new energy sources, the company was given thermal power/clean energy 1.0/20.0x 24E PB/PE, with a target market value of 142.8 billion yuan and a target price of 19.15 yuan (previous value 19.99 yuan), maintaining the “buy” rating.

Net profit from coal power to electricity reached 4 points in 1H24. Net profit from new energy sources fell by 1H24 year on year in 2Q24. The company's coal-to-electricity feed-in capacity was +2.5% to 26.382 billion kilowatt-hours, and the company's thermal power feed-in price was -1.5% to 0.465 yuan/kilowatt-hour. We estimate that the company's 1H24 net profit/net profit attributable to mother was 1.059/0.62 billion yuan, and the net profit from coal power generation was as high as 4 points. Among them, the net profit of Qinzhou Power Generation/Huaxia Power 1H24 kilowatt hour power reached 8.5/7.3 points. Qinzhou Phase III Unit 1/2 was put into operation on 2023/12/31 and 2024/4/29, which is expected to drive future profit growth in the company's thermal power sector. In 2Q24, the company's feed-in electricity volume of wind power was -3.4% to 1.719 billion kilowatt-hours, and the average feed-in price was -8.4% to 0.457 yuan/kilowatt-hour (tax included). We believe that consumption problems worsened mainly due to poor wind intake and the large number of new energy sources connected to the grid. The net profit contribution of the company's new energy sector declined year-on-year in 2Q24.

Since July 28, the outbound flow of power plants belonging to the Yalong River has increased dramatically year-on-year. Q3 electricity consumption can be expected to be 1H24, and the Yalong River hydropower feed-in capacity is +9.39% to 37.945 billion kilowatt-hours, corresponding to 2Q24 +37.38% year-on-year. The sharp improvement in water since June of this year has increased the share of feed-in electricity during the flood season when electricity prices are low. The Yalong River 1H24/2Q24 feed-in tariff was -9.65%/-1.85% year-on-year to 0.319/0.309 yuan/kilowatt-hour.

In 1H24, Yalong River Hydropower revenue/net profit to mother was +3.16%/+2.53% YoY to 11.37/4.4 billion yuan. According to the Sichuan Hydrological Network, since July 28, the daily outbound traffic of the Ertan, Jinping Level 1, and Guandi hydropower stations has increased by more than 70% compared to the same period, and the feed-in electricity volume of the Yalong River can be expected to increase year-on-year in 3Q24. 1H24, thanks to a year-on-year increase in power generation, the net profit of Dachaoshan/Xiaosanxia rose +21%/+16% year over year to 0.36/0.2 billion yuan. In 1H24, the three hydropower holding subsidiaries contributed a total of 2.592 billion yuan in net profit to the mother.

Risk warning: The rise in incoming shui/Liangyang power generation/market-based electricity prices fell short of expectations; the increase in coal prices exceeded expectations.