Brief performance review

On the evening of October 28, the company disclosed its quarterly report for 2013. From 1 to 3Q24, revenue was 4.93 billion yuan, +25.1% year over year; Q3 achieved revenue of 1.995 billion yuan, +27.6% year over year.

From 1 to 3Q24, net profit to mother was 0.11 billion yuan, +29.9% year over year; Q3 realized net profit to mother 0.07 billion yuan, +202.3% year over year.

Management analysis

Downstream thermal power CAPEX continues to grow, and early orders are confirmed. From 1 to 3Q24, the thermal power industry achieved an investment of 87 billion yuan, +27.3% over the same period. The Q3 growth rate increased month by month. Since the implementation of the verification capacity compensation mechanism, new thermal power generation has progressed rapidly. The company signed a new contract of 9.256 billion yuan in '23, accounting for the majority of business orders related to thermal power. The unconfirmed contract amount reached 6.276 billion yuan within 23 years, and implementation is expected to be accelerated this year. In terms of profitability, due to increased market competition, the 3Q24 gross margin was 10.1%, a slight decrease of 1.6 pct from the previous year.

Demand for thermal power flexibility transformation and ocean breeze construction is expected to pick up and contribute to orders. The 1-3Q24 company signed a new order of 9.53 billion yuan, +61.6% year over year (2.21 billion yuan of new orders in a single Q3, +21.1% year over year); it has won the bid yet to sign a sales contract of 2.36 billion yuan, and the thermal power sector is expected to remain the main player in receiving orders. The new peak diversion policy is forcing and stimulating the transformation of thermal power; land approval in Jiangsu and Guangdong is gradually becoming clear, and the progress of sea breeze construction is expected to accelerate, all of which are expected to take over and form new order growth points in the future.

Policies and new business models have been implemented, and the company lays out hydrogen energy and ammonia alcohol to seize the new energy direction. Central and local policies related to hydrogen energy have been introduced continuously, driving the development of the industry and gradually forming a whole industry chain of “scenery - green electricity - energy storage - green hydrogen - green carbon glycol” from the resource side to the consumption side. The company's three major hydrogen production projects have all successfully achieved commercial operation. Among them, the Damaoqi project, as the first domestic technical route with both alkaline and PEM hydrogen production, has benchmark significance. The company has project endorsements and will fully benefit from the industry. At the same time, the company is actively following up integrated wind and photovoltaic hydrogen alcohol production projects in Liaoning, Jilin, Vietnam, Indonesia, etc., to develop an integrated business model and create stable cash flow.

Profit Forecasts, Valuations, and Ratings

The company is expected to achieve net profit of 0.27/0.35/0.4 billion yuan from 2024 to 2026, and EPS of 0.23/0.30/0.34 yuan respectively, corresponding to PE of 25 times, 19 times, and 17 times, respectively, maintaining a “buy” rating.

Risk warning

Investment in thermal power falls short of expectations, ocean wind construction falls short of expectations, new businesses such as hydrogen energy and ammonia alcohol fall short of expectations, and risk of exchange rate fluctuations.