CCI Energy announced its results: 3Q24 revenue of 5.047 billion yuan, +16.6% year on month; net profit to mother 0.103 billion yuan, -27.7% year on month, +25.7% month on month; deducted non-net profit of 0.061 billion yuan, -51.7% year on month, -9.3% month on month. In the first three quarters, the company achieved revenue of 15.8 billion yuan, +18.9% year on year; net profit to mother of 0.436 billion yuan, +92.5% year over year; deducted non-net profit of 0.372 billion yuan, +276% year over year.

The company's net profit for the third quarter fell short of our expectations (1.78 to 0.196 billion yuan), mainly because R&D expenses were higher than expected. The scale of coal and electricity installations continued to expand, and electricity prices and coal price factors contributed to a recovery in profit margins. Cooperative development of thermal power+new energy can complement each other to improve the asset structure. Maintain an “Overweight” rating.

The scale of coal and electricity installed capacity continued to expand. Electricity prices and coal price factors contributed to a recovery in profit margins. 9M24/3Q24, the company's power generation capacity yoy +17%/+16% to 35.9/12.9 billion kilowatt-hours. The 3Q24 growth rate was higher than the overall power generation growth rate in Hebei Province (+0.3% year over year). 9M24/3Q24 The company's average settlement price of electricity was -0.8%/-1.0% to 397/398 yuan/MWH (excluding tax), and electricity prices remained basically stable. At the end of September '24, the company's coal power installed capacity is not less than 10.45 million kilowatts; the company plans to start construction of Renqiu Thermal Power Phase II 2x0.35 million kilowatts and the Xibaipo Power Plant Phase IV 2x0.66 million kilowatt project, which is expected to be put into operation as early as 2026; the company plans to purchase 50% of Qin Electric Company's shares and 50% of Zhunneng Company's shares from major shareholders, corresponding to 1.4/1.32 million kilowatts of coal power installed. 3Q24's comprehensive gross margin was +3.85pp to 18.36% year on year, thanks to the increase in electricity consumption and the 1.6% year-on-year decrease in the unit price of standard coal.

Coal-power+new energy collaborative development, complementary asset structure The company adopted the coal/heat+new energy collaborative development path. By the end of June, the company had put into operation 0.306 million kilowatts of new energy installed, 0.9 million kilowatts of projects under construction, and 2.16 million kilowatts of registered and reserve projects; as projects under construction are put into operation one after another, new energy generation revenue is expected to continue to grow rapidly. The company has set up a construction investment energy storage company to participate in the research and development of liquid compressed air energy storage technology; the company is actively promoting the inclusion of savings projects in the plan; the company is gradually improving the power asset structure through multi-energy complementary methods.

The profit forecast was lowered. Based on the 25-year target valuation, the target price was adjusted based on an increase in the R&D/finance expense ratio and minority shareholders' equity ratio. We lowered the 24-26 net profit forecast to 0.557/0.715/0.815 billion yuan (previous value 0.665/0.863/0.983 billion yuan). The year-on-year growth rate was +233%/+28%/+14%, corresponding to BPS of 5.69/5.82/5.94 yuan. Wind agreed that the average 25-year PB of comparable companies was 1.2x. Considering that the company's ROE was lower than the comparable average, the company was given 1.1xPB for 25 years, with a target price of 6.41 yuan (previous value 6.33 yuan).

Risk warning: The increase in coal prices exceeded expectations, the number of hours used fell, and the progress of projects under construction fell short of expectations.