Backed by China Southern Power Grid's deep commitment to energy saving services, the overall performance has remained stable. The company focuses on industrial energy efficiency, building energy saving and urban lighting energy saving, and takes into account consulting and engineering and comprehensive resource utilization services. In 2023, the company achieved operating income of 2.988 billion yuan, a year-on-year increase of 3.46%, and net profit to mother of 0.311 billion yuan, a year-on-year decrease of 43.90%.

2024H1 achieved revenue of 1.324 billion yuan, a year-on-year increase of 1.57%, and net profit to mother of 0.205 billion yuan, an increase of 5.29% year-on-year.

Industrial energy efficiency: The main growth point is distributed photovoltaic power generation. In 2023, the distributed photovoltaic business achieved revenue of 1.188 billion yuan, an increase of 20.65% over the previous year. The 2024H1 distributed photovoltaic energy saving business achieved revenue of 0.563 billion, an increase of 12.71% over the previous year. The company focuses on promoting collaborative development and investment in new industries and new energy sources. The total installed scale of distributed photovoltaics to be carried out in 2023 is about 0.8914 million kilowatts, with a total investment of about 3.575 billion yuan. The 2024 fixed asset investment plan is 8 billion yuan, mainly investing in new business fields such as distributed photovoltaics and decentralized wind power.

Energy efficiency in buildings: The company has rich project experience and has implemented nearly 50 key projects, including: 1) Hospitals: providing comprehensive services for energy system transformation, equipment operation and maintenance, and digital logistics for many of the top three hospitals; 2) Schools: Many universities, senior vocational schools, middle schools and primary schools provide energy-saving transformation services; 3) Others:

The three major operators in the communications sector are energy-saving renovation of aircraft buildings and building energy-saving services in the rail transit sector. In 2023, building energy efficiency service revenue was 904.5275 million yuan, up 18.25% year on year. H1 revenue in 2024 was 4.11 billion yuan. The overall trend is positive.

Comprehensive energy utilization business: 1) Decentralized wind power business: Strengthen connections with local governments in Maoming, Zhaoqing, Shaoguan, Wuzhou, Fangchenggang, etc., and have signed more than 40 decentralized wind power investment agreements, with a capacity exceeding 6 GW, of which more than 20 wind measurement sites have been carried out. In 2024, H1 operated 0.08 million kilowatts of wind power projects, achieving revenue of 20.6972 million yuan. The joint venture with Guangxi Power Grid Corporation has been formally established and operated, and has achieved remarkable results in using territorial resources to promote the development of new decentralized wind power warfare businesses. 2) Load aggregator business: At present, it has completed more than 100 projects and more than 180 megawatts of photovoltaic and air conditioning load access network-level distributed source aggregation platforms, and successfully registered as a load aggregator at the Guangdong Electric Power Trading Center. In the future, the company will actively promote the innovative design and implementation of the source-load aggregation service business model.

Investment advice: We expect the company's 24-26 revenue to be 3.413, 4.034, and 4.769 billion yuan, with revenue growth rates of 14.2%, 18.2%, and 18.2% respectively; net profit to mother of 0.422, 0.526, and 0.634 billion yuan, and net profit growth rates to mother of 35.8%, 24.7%, and 20.6% respectively. Corresponding to the closing price on October 11, PE was divided into 41x/33x/27x in 24-26, covered for the first time, and gave a “recommended” rating.

Risk warning: the risk of increased competition in the industry; the risk of policy adjustments; the risk of management models.