On the evening of October 28, the company disclosed the results of the three-quarter report. The company achieved revenue of 2.58 billion yuan from 1 to 3Q24, +31.7% year-on-year; net profit to mother was 5.7 yuan, +71.7% year-on-year. Among them, Q3 achieved revenue of 0.73 billion yuan, +8.6% year over year, and realized net profit of 67 million yuan to mother, or -97.98% year over year.

Installed capacity is driving electricity growth, and the new energy sector supports 3Q24 performance. The electricity contribution of the Yongning, Jianshuitang Liangzi, and Jinzhong 1/2 projects increased year-on-year. 3Q24 sold 0.54 billion kilowatt-hours of new energy electricity, +67.8% year over year; achieved revenue of 0.15 billion yuan, +27.9% year over year; realized net profit of 2.018 million yuan, or +145.8% year over year.

Q3 is the traditional light wind season, which is also the peak season in Yunnan; along with the operation of new market-based affordable projects and a decline in weighted average electricity prices, the profit side still achieved a high increase due to a combination of factors such as falling installed costs and not counting depreciation costs during the trial operation phase of new speculative units. The company's future growth is mainly the 0.67 million kilowatt wind power expansion project in the province. Currently, the approval application has been reported to the Provincial Development and Reform Commission.

The salt and gas business has been dragged down for the time being. 3Q24 salt sector revenue -19.7% year-on-year, net profit -111.7% year-on-year, mainly affected by low season salt sales, falling industrial salt demand and falling prices; natural gas sector revenue +51.98% year-on-year, and net profit to mother -47.6% YoY. Although gas sales volume was +79% YoY, it was still unable to cover the increase in new depreciation costs brought about by the correction of branch pipelines.

Profit Forecasts, Valuations, and Ratings

We expect the company to achieve net profit of 0.79/0.92/1.07 billion yuan in 2024^2026, and EPS of 0.86/0.99/1.16 yuan respectively. The corresponding PE is 14 times, 12 times, and 10 times, respectively, maintaining a “buy” rating.

Risk warning

Risk of electricity demand falling short of expectations; risk of changes in electricity price policy in Yunnan Province; risk of PV installations impacting market-based electricity prices in Yunnan Province; risk that the Group's photovoltaic asset injection falls short of expectations; risk that the salt industry and natural gas business fall short of expectations, etc.