Zhongjin released research reports stating that the overall performance of 1H24 new energy power companies was lower than market expectations. The profitability of 1H24 new energy assets continued to decline, reflecting the pressure of utilization hours and comprehensive electricity prices, amplifying the profit decline due to cost rigidity. However, with frequent policies on demand and environmental value in the industry, it is still recommended to focus on undervalued green electricity tracks, and to recommend China Power (02380) and Huaneng Power International, Inc. (00902).

Industry data review: Regional differentiation is significant, with the south performing relatively well, but the northeastern region, Hubei/Xinjiang/Gansu faced marginal pressure. Specifically: Southern provinces have strong power consumption capacity. The southeastern (Jiangsu, Zhejiang, Shanghai, Anhui, etc.) has strong electricity demand, with thermal power as the main electricity structure, strong regulating capacity, and wind and solar utilization rates close to 100%. The southwest (Sichuan, Chongqing, Yunnan, etc.) has resource and electricity price advantages, attracting high-energy-consuming enterprises to relocate, with high industrial production activity and wind and solar utilization rates above 97%. The Three North regions' power consumption capacity continues to be under pressure. The Northeast has weak demand, with wind/solar utilization rates at 92-94%/95-97% year-on-year, a decline of 3-4/4-5 percentage points; the Northwest has a high proportion of clean energy, but insufficient regulating and external transmission capacity. However, Inner Mongolia has strong electricity demand exacerbated by poor wind resources, leading to improvement in power consumption year-on-year. The central water-rich provinces' power consumption capacity is marginal.

Review of power company performance: The profit of 1H24 new energy per kWh is 0.12-0.26 yuan, with wind/solar year-on-year declines of 11-13%/20-30%; green income quantity has risen but prices have fallen. In terms of power consumption, wind power utilization hours have declined by a high single-digit percentage year-on-year, mainly due to poor wind resources, with the year-on-year decline in power limitations within 2 percentage points. Photovoltaic utilization hours have declined by low single-digit percentage year-on-year, mainly due to power limitations, with a year-on-year decline in power limitations of over 3 percentage points.

In terms of electricity prices, comprehensive electricity prices have accelerated year-on-year, with a greater decline in photovoltaics compared to wind power, mainly due to the rapid increase in the scale of parity projects and a higher growth rate compared to the same period last year. Trading electricity prices have both risen and fallen, with limited drag on comprehensive electricity prices; photovoltaics face greater pressure due to time-of-use electricity pricing policies and concentrated declines in output hours. Green electricity trading accounts for 8-13% of the market, with a premium of 4-5 points/kWh; green certificate premiums of 0.3-1 point/kWh. The unit premium has declined year-on-year, but the scale has rapidly increased.

2H24 outlook: New energy operators' supply and prices are temporarily under pressure, awaiting a medium-to-long-term rebalancing of power consumption. New energy electricity prices may continue to be under pressure, but the marginal impact is weakening. Since 2024, multiple policies have guided the decomposition of green power consumption responsibility to the user side, with energy-intensive industries taking the lead in bearing responsibility. The industry is expected to transition from the current pressure on supply and prices to short-term quantity-based pricing, and medium-to-long-term supply-demand rebalancing. At the same time, the accelerated return of state subsidies will ease the contradiction of high capital expenditure and leverage testing, as well as limited equity financing.

Risk factors: An unexpected rebound in power limitations, a greater-than-expected decline in market electricity prices, unanticipated policy implementation.