The performance for the first half of 2024 was in line with expectations, and the company adjusted part of the stock and debt structure of associated companies. On August 14, Electric Energy Industrial released its 2024 mid-year report. The company's profit for the first half of the year was HK$3.006 billion, up 2% year on year. Of this, it should account for the joint venture's performance of HK$2.014 billion, up 13.34% year on year, and should account for the joint venture's profit of HK$0.711 billion, up 16.56% year on year. In the first half of 2024, the company decided to pay a dividend of HK$0.78 per share, which remained unchanged from the previous year.

The UK sector is growing faster, and the Canadian and mainland businesses declined significantly from year to year. The company's UK sector's profit as of mid-2024 was HK$1.55 billion, up 10.87% year on year. The increase in profitability in the UK sector, such as UK Power Network, Northern Gas Networks and Wales & WestGas Networks, was mainly due to lower financing costs in the context of falling inflation in the context of falling inflation in the UK sector's debt. The Australian sector made a profit of HK$0.601 billion, up 7.7% year over year. In terms of other business, profits in the Chinese sector have not improved. The Canadian sector almost saw a large year-on-year decline in revenue due to falling electricity prices, and profits in the New Zealand and Thailand sectors are in line with expectations. In terms of regulating business, Northumbrian Water, SA PowerNetworks, and Wellington Electricity will all submit new regulatory resolutions. HK Electric 2024H1 achieved revenue of HK$5.572 billion, up 6.56% year on year, and the company's electricity sales volume increased 1.8% year on year. However, electricity prices declined as coal and gas costs fell. Capital expenditure increased basic electricity costs by HK$0.05 per kilowatt hour. HK Electric's profit for the first half of the year was HK$0.947 billion, down -3.56% year on year. The dividend for the first half of 2024 remained unchanged at around HK$0.16 per share. HK Electric's 2024-2028 capital expenditure plan will increase the investment of HK$22 billion, including the construction of a new combined-cycle generator set and 3 single-cycle fuel units to increase the overall share of clean energy generation to 70%.

Since this year, its joint ventures have carried out multiple mergers and acquisitions, and the business segment has continued to expand.

By the end of August 2024, Electric Energy Industrial and Changshi had each acquired Phoenix Energy, the largest gas distribution network in Northern Ireland, at an undervaluation of HK$7.4 billion, accounting for 40% of electricity. UKPN, a subsidiary of the company, has acquired the 69MW solar power plant UU Solar. At the same time, the company also announced a joint acquisition of 32 wind farm assets in the UK with Changjian and Changshi, with an estimated investment amount of HK$3.5 billion.

Profit forecast and investment advice: We expect the company's net profit for 2024-2026 to be HK$6.176/6.338/6.51 billion respectively. Considering that the company currently uses joint venture dividends and interest as the main cash income, and the dividend payment rate is close to 100%, we use a new cash flow discount valuation method to discount future cash flow from the joint venture company's dividends and interest cash flow collected by the company based on the life of the asset. The target price was updated to HK$52.04, corresponding to 16 times PE in 2024, maintaining the “superior market” rating .

Risk warning: international geopolitical risk; risk of abnormal exchange rate fluctuations; infrastructure sector policy and regulatory risks in various countries and regions