Description of the event

The company issued an operating information announcement for the third quarter of 2024: In the third quarter of 2024, the company's operating power plants completed 6.464 billion kilowatt-hours of power generation, a year-on-year decrease of 3.51%; completed feed-in electricity consumption of 6.15 billion kilowatt-hours, a decrease of 3.35% year on year; completed heating capacity of 2.5344 million tons, an increase of 3.09% year on year.

Incident comments

Thermoelectricity is steady, gas and electricity are increasing, and thermal power performance prospects are steady. Thanks to high demand compounded by marginal weakening of hydropower output, the company's cogeneration generated 2.279 billion kilowatt-hours in the third quarter, an increase of 0.08% over the previous year, and completed heating capacity of 2.5344 million tons, an increase of 3.09% over the previous year. In terms of cost, the average price of Q5500 coal liquidation at Qinhuangdao Port in the third quarter decreased by about 18.10 yuan/ton compared to the same period last year. However, when considering the power plant's coal inventory for about 20 days, the 2024 average rose by about 13.58 yuan/ton compared to 2023. Considering the smoothness of the company's Changxie Coal, the company's cost side changes are expected to be relatively limited. The company's thermal power business is expected to continue to perform steadily in the third quarter. Although the company's control of coal power completed 1.473 billion kilowatt-hours in the third quarter, a year-on-year decrease of 20.19%. The main reason for the sharp decline in coal and electricity production was only 51%, and on the other hand, coal power accounted for a relatively low share of the company's net profit. Coal power accounted for only 3.82% of the company's net profit in the first half of the year, so the decline in coal power production had limited impact on the company's overall business performance. In terms of gas and electricity, gas and electricity generated 1.682 billion kilowatt-hours in the third quarter, an increase of 9.66% over the previous year. The high increase in gas and electricity is expected to continue to improve gas and electricity business performance in the third quarter. Therefore, considering the impact on gas and electricity operations, the pressure on coal power is expected to be hedged, and the company's thermal power business performance outlook for the third quarter is steady.

Weak wind power is under pressure in the short term, and the overall outlook for third quarter results is stable. Affected by weak incoming wind in the third quarter, the company's wind power generation completed 1.017 billion kilowatt-hours, a year-on-year decrease of 1.34%. Among them, offshore wind completed 0.598 billion kilowatt-hours, a year-on-year decrease of 1.41%, and onshore wind power completed 0.419 billion kilowatt-hours, a year-on-year decrease of 1.24%. As a result, the company's new energy performance in the third quarter may be under pressure due to a short-term decline in electricity consumption due to weak incoming wind. In terms of investment income, since the company's participating companies are mainly thermal power and wind power operators in Fujian Province, considering that Fujian Lai Feng was close to the company's performance in the third quarter, and that the thermal power management was also close to the company's thermal power asset performance, although considering that participating companies may expand on a large scale, the investment income or performance is expected to be stable. Therefore, overall, the company's overall performance outlook for the third quarter was stable due to year-on-year or pressure on new energy performance due to short-term pressure on wind power, and the steady operation of thermal power and the impact of alternative electricity generation may have a smooth impact to a certain extent.

Investment advice and valuation: Although the company's short-term operating performance may be affected by weak incoming wind, against the backdrop that Fujian Haifeng may restart approval, the company's Haifeng growth is also expected to usher in a new round of catalysis, and the company's long-term growth can be expected. According to the company's latest operating data, we adjusted the company's profit forecast. The company's EPS for 2024-2026 is 1.10 yuan, 1.18 yuan, and 1.32 yuan, respectively, and the corresponding PE is 8.63 times, 8.02 times, and 7.17 times, respectively. Maintain a “buy” rating.

Risk warning

1. The risk of non-seasonal increases in coal prices;

2. The construction progress of the new project falls short of the expected risk.