Incident: The company released its three-quarter report for 2024. From January to September, the company achieved operating income of 56.986 billion yuan, an increase of 1.60% year on year; net profit to mother was 8.934 billion yuan, down 4.22% year on year. Among them, 3Q24 achieved net profit of 3.052 billion yuan to mother, an increase of -7.10% over the previous year, mainly due to lower market-based electricity prices, lower revenue growth than cost increases, and the company's performance was slightly lower than our expectations.

Influenced by the increase in major and minor repairs, the volume of nuclear power maintained a year-on-year downward trend in the third quarter. 9M24 completed 160.388 billion kilowatt-hours of electricity generation, up 2.70% year on year, and feed-in power of 151.121 billion kilowatt-hours, up 2.92% year on year. As of September 2024, no new nuclear power units were put into operation. 9M24 nuclear power generation capacity was 135.638 billion kilowatt-hours, a year-on-year decrease of 2.74%. Among them, 3Q24 nuclear power generation was 46.485 billion kilowatt-hours, a year-on-year decrease of 5.51%; feed-in electricity was 43.358 billion kilowatt-hours, a year-on-year decrease of 5.62%. The slight decline in power generation in the third quarter was mainly due to a year-on-year increase in overhaul arrangements for some units and a year-on-year decrease in power generation due to minor repairs to Fuqing Unit 4. Looking forward to the future, Fuqing Unit 4 has been restarted, and the Zhangzhou Unit 1 is about to be put into operation to guarantee increased power generation in 4Q24 and next year.

The Zhangzhou Unit 4 has entered the FCD stage, and nuclear power has high growth certainty over a long period of time. The pace of nuclear power approval has accelerated in recent years. Up to now, in 2024, China has approved 11 nuclear power units, the highest level in recent years. Among them, 3 units of the company's Xuwei nuclear power project were approved by the National Assembly in August 2024. As of August 2024, the Company holds 25 and 18 nuclear power installations in operation, under construction and approved for construction, respectively, with a total installed capacity of 23.75 and 20.64 GW (including the Jiangsu Xuwei Project, which was newly approved in August 2024). Projects under construction and approved have 87% incremental space compared to projects in operation. According to the company's announcement, Unit 4 of the Zhangzhou Nuclear Power Plant entered the FCD phase on September 27th. It is expected that in 2024-2030, the company will start production of 1, 1, 2, 5, 2, and 2 units respectively. The accelerated pace of production is expected to continue to contribute to the increase in installed capacity, and the growth of the company's main nuclear power industry is certain.

Q3 Renewable energy installations continue to increase the trend of high growth and continue to contribute to the increase in power generation. As of today, 9M24 is holding 24.15 GW of new energy installed, of which 7.83 and 16.32 GW of wind power and photovoltaics are respectively, and 1.33 GW of independent energy storage power plants. Of these, 3Q24 has 1.78 GW of new energy installed capacity, of which new wind power and photovoltaic installations are 0.27 and 1.50 GW respectively. The increase in the scale of installed equipment in operation led to a year-on-year increase in the company's new energy generation capacity. 9M24's wind power and photovoltaic power generation capacity was 11.109 and 13.641 billion kilowatt-hours, respectively, up 45.91% and 50.10% year-on-year, respectively. According to the company's 14th Five-Year Plan target, the company's new energy installed capacity will reach 30GW by the end of 2025, and it is expected that the company's installed capacity will continue to contribute to the increase in electricity volume.

The effect of reducing financial fees is remarkable, and fixed increases expand financing channels. As of 9M24, the company's balance ratio was 69.28%, down 1.94 pct from mid-year to year.

During this year, the five-year LPR was lowered by 25, 10, and 25 BP in February, July and October, respectively. The company's financial pressure was reduced during the interest rate cut period, and 9M24's financial expenses fell 0.111 billion yuan to 5.289 billion yuan year on year. In July 2024, the company issued a fixed increase plan to raise no more than 14 billion yuan for investment and construction of 8 nuclear power unit projects. The company has taken many measures to enrich the capital pool during the high capital opening cycle.

Profit forecast and rating: Combined with the three quarterly report data, we lowered the 2024 hourly forecast for some of the company's nuclear power units, and also lowered the company's 2024 net profit forecast to 10.633 billion yuan (original value was 11.318 billion yuan), and maintained the company's 2025-2026 net profit forecast at 12.848 and 13.429 billion yuan. Based on the share capital calculation after fixed increase issuance, the company's current stock price corresponds to PE 20, 17, and 16 times, respectively. Maintain a “buy” rating.

Risk warning: The progress of new energy installations falls short of expectations, the risk of falling electricity prices, and the review of fixed increase plans is slower than expected