3Q24 results are in line with our expectations

China General Nuclear Power announced the results for the first three quarters and held a performance briefing: 9M24's revenue was 62.3 billion yuan, +4.1% year over year; net profit to mother was 9.98 billion yuan, +2.9% year over year. Among them, 3Q24's revenue was 22.9 billion yuan, +11.3% YoY; net profit to mother was 2.87 billion yuan, +4.9% YoY.

The electricity price of 9M24 transactions (tax included, same below) fell 1 cent year on year to 0.39 yuan/kilowatt-hour, and market-based electricity transactions accounted for +0.7ppt to 51.2% year on year. 3Q24 Holdings's feed-in electricity volume increased 15.2% year over year, benefiting from the 60-day reduction in the number of 9M24 overhaul days and preventing the increase in #4、台 #1 contributions:

The electricity price for 9M24 transactions in Guangdong fell 2.2 cents/kilowatt-hour year on year, up from the 1H24 (9% reduction) decline. The 9M24 transaction price of electricity is 0.38 yuan/kilowatt-hour (vs. 9M23 0.4 yuan/kilowatt-hour), mainly due to the decline in monthly bid electricity prices due to the flood season. The share of electricity transactions was -2.1ppt to 24.2% year over year.

The year-on-year decline in Guangxi 9M24 was slightly narrower than 1H24. Under the government-authorized CFD and electricity price concession mechanism, 9M24 trading electricity prices fell 1.7 points/kilowatt-hour year on year (vs. 1H24 down 2 points). Prevention #4 will not participate in market-based transactions this year, and the share of electricity in the Guangxi market has dropped to 84.2%.

Fujian/Liaoning is generally stable. Market-based electricity prices in Fujian/Liaoning decreased by 2.2 and 1.1 percent per kilowatt-hour year on year, and the share of electricity transactions remained flat year-on-year /+12ppt to 100%/71.3%.

Costs and expenses have risen due to multiple effects. We think the main reason: 1) The 3Q24 R&D expenditure rate increased by 0.7ppt to 2.5% year on year. The main reason is that some applied research projects were settled in 3Q24, and the company expects to remain stable throughout the year. 2) The commissioning of the new unit added depreciation and financial expenses, and the fuel abundance that was later replaced was higher than that of the first furnace fuel, increasing fuel costs. 3) Units that have been in operation for more than 5 years have begun to accrue spent fuel disposal funds. However, the 3Q24 management/finance expense ratio decreased by 0.5ppt/0.2ppt to 2.7%/6% year over year.

Development trends

The company expects Huizhou-1 to be shipped in 2025, and we expect assets to be injected as scheduled. The crew completed the hot test on September 15, 2024, and we look forward to the injection of assets to boost the company's profits and cash flow.

The overhaul schedule is progressing according to plan. 3Q24 completed 5 annual material replacement overhauls as planned. 4Q24 In addition to continuing the material replacement overhaul that has already begun (including 1 10-year material replacement overhaul), the company plans to carry out 3 new annual material replacement overhauls (vs. 1 new one in 4Q23).

Profit forecasting and valuation

Carefully predicting the performance and cost of electricity trading in Guangdong, we lowered our 2024-25 profit forecast by 6.2%/3.1% to 12.1 billion yuan/13.6 billion yuan. The current A share price corresponds to 17.3x/15.3x P/E in 2024-25, and H shares correspond to 10.9x/9.4x P/E. Maintain the outperforming industry rating and target price of A/H shares unchanged, corresponding to 23.6x/20.9x P/E for A shares and 15.1x/13.0xP/E for H shares in 2024-25. There is 36%/39% upside compared to the current A/H share price.

risks

Due to the nuclear safety incident, electricity prices in the market declined beyond expectations, and the spot price of natural uranium rose above expectations for a long time.