Incident: On the evening of October 30, 2024, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 44.395 billion yuan, up 4.34% year on year; realized net profit of 6.578 billion yuan, up 8.69% year on year; net profit after deducted from mother was 6.351 billion yuan, up 5.43% year on year; net cash flow from operating activities was 21.361 billion yuan, up 21.67% year on year, with basic earnings per share of 0.8634 yuan.

Among them, 2024Q3 achieved operating income of 17.294 billion yuan, an increase of 6.87% year on year; realized net profit of 2.834 billion yuan, up 4.38% year on year; net profit after deduction of 2.634 billion yuan, down 2.65% year on year. Q3 The company generated non-recurring profit and loss of 0.2 billion yuan, mainly income from the disposal of illiquid assets.

Comment:

Hydropower: In Q3, incoming water from the Yalong River and Xiaosanxia hydroelectric areas was abundant year over year. The amount of feed-in electricity increased significantly, and electricity prices dropped slightly year on year. In the first three quarters of 2024, the company's hydropower feed-in electricity volume was 79.89 billion kilowatt-hours, an increase of 15.55% over the previous year. Among them, Q3's hydropower feed-in electricity volume was 36.831 billion kilowatt-hours, an increase of 22.71% year-on-year, an increase of 22.71%. The company's hydropower prices fell slightly in the first three quarters of 2024. The average feed-in electricity price for hydropower was 0.292 yuan/kilowatt-hour, a year-on-year decrease of 2.19%. Looking at the watershed:

1) Yalong River Hydropower: In the first three quarters of 2024, the Yalong River hydropower feed-in capacity was 71.488 billion kilowatt-hours, with a year-on-year increase of 16.05%, of which the Q3 hydropower feed-in capacity was 33.543 billion kilowatt-hours, an increase of 24.63%; the decline in outbound electricity prices and the increase in power generation during the flood season led to changes in the electricity volume structure, compounded by a high electricity price in the same period last year. The average feed-in price for Yalong River hydropower in the first three quarters was 0.303 yuan/kilowatt-hour, down 1.94% year on year. 0.285 yuan/kwh, a year-on-year decrease of 1.38%. 2) SDIC DaChaoshan: In the first three quarters of 2024, SDIC Dachaoshan achieved feed-in power of 5.111 billion kilowatt-hours, an increase of 5.75%. Among them, Q3 achieved feed-in power of 1.897 billion kilowatt-hours, a year-on-year decrease of 5.4%; the average feed-in price for the first three quarters was 0.189 yuan/kilowatt-hour, up 1.61% year on year. 3) SDIC Small Three Gorges: In the first three quarters of 2024, SDIC's feed-in electricity volume was 3.29 billion kilowatt-hours, up 21.75% year on year. Among them, Q3 feed-in power was 1.391 billion kilowatt-hours, up 27.02% year on year; the average feed-in price for the first three quarters was 0.232 yuan/kilowatt-hour, down 9.73% year on year.

Thermal power: An abundance of incoming water from Guangxi, Guizhou and other places is squeezing part of the thermal power supply. The increase in electricity consumption and power transmission in Fujian Province and the commissioning of new units make up for the decline in electricity to a certain extent. In terms of electricity volume, the company achieved 41.562 billion kilowatt-hours of electricity in the first three quarters of 2024, a year-on-year decrease of 0.64%. Among them, Q3 thermal power feed-in capacity was 15.124 billion kilowatt-hours, a year-on-year decrease of 5.79%. In terms of electricity prices, the company's average feed-in tariff in the first three quarters of 2024 was 0.463 yuan/kilowatt-hour, a slight decrease of 2.11% year-on-year. Among them, the average feed-in price for Q3 was 0.459 yuan/kilowatt-hour, a year-on-year decrease of 3.16%.

New energy: The increase in installed new energy has led to a sharp rise in electricity volume. In terms of electricity, in the first three quarters of 2024, the company added 0.9957 million kilowatts of new energy installed; the 2024Q3 added 0.5608 million kilowatts of installed capacity. In the first three quarters of 2024, the company's new energy feed-in capacity was 8.458 billion kilowatt-hours, up 25.3% year on year. Among them, wind power feed-in power was 4.89 billion kilowatt-hours, up 1.43% year on year, and photovoltaic feed-in power was 3.568 billion kilowatt-hours, up 84.94% year on year. Q3 New Energy achieved feed-in power of 2.695 billion kilowatt-hours, a year-on-year increase of 13.05%. Among them, wind power feed-in capacity was 1.429 billion kilowatt-hours, a year-on-year decrease of 7.28%, and photovoltaic feed-in electricity was 1.266 billion kilowatt-hours, an increase of 50.08% year-on-year. In terms of electricity prices, due to the deepening degree of marketization of green power and the impact of affordable internet access for newly put into production units, new energy feed-in tariffs declined in the first three quarters of 2024. The average feed-in price for wind power was 0.469 yuan/kilowatt-hour, down 2.7% year on year, and the average feed-in price for photovoltaic power generation was 0.516 yuan/kilowatt-hour, down 27.73% year on year. Q3 The company's average feed-in price for wind power was 0.453 yuan/kilowatt-hour, down 0.88% year on year, and the average feed-in price for photovoltaic power generation was 0.459 yuan/kilowatt-hour, down 25.12% year on year.

Looking forward to the future, we believe that incoming hydropower in all watersheds is expected to continue to improve year-on-year in 2024, driving high hydropower growth; thermal power is expected to continue to benefit from performance improvements brought about by increased electricity consumption and lower costs. In the long run, the company's Yalong River Hydropower has both steady and high growth potential. The Liangyang Power Plant is expected to contribute a significant increase in power generation to Yalong River hydropower. It has room for installed capacity of more than 10 million kilowatts over a long period of time. At the same time, the installed capacity of new energy sources is accelerated, which is expected to jointly drive the steady growth of the company's performance.

The scarcity of high-quality large hydropower assets in the Yalong River is prominent, and the hydropower business is stable and has high growth potential.

Yalong River Hydropower, the core asset of the company's hydropower business, is the sole entity in the development of hydropower resources in the Yalong River basin. The Yalong River is the third largest hydropower development base in China. The natural resource endowment of the basin is excellent, and its scarcity as a high-quality large hydropower asset is highlighted. In addition, three major regulatory reservoirs have been built in the watershed, with strong cascade scheduling capabilities. The number of hours used for hydropower generation in the Yalong River Basin is high and there is little interannual fluctuation, and the company's hydropower operation is remarkable. The entire Yalong River basin is planned to have an installed capacity of more than 30 million kilowatts. Currently, 19.2 million kilowatts have been developed, and there are plenty of resources to be developed. In 2021-2022, the Lianghekou and Yangfanggou power plants were put into operation one after another, with a total installed capacity of 4.5 million kilowatts. As the two estuaries basically complete water storage, the power plant's own power generation capacity and downstream cascade compensation benefits will continue to be released, we expect to contribute a significant increase in power generation to hydropower in the Yalong River. In addition, the Kala and Mengdigou hydropower stations are under construction, with a total installed capacity of 3.42 million kilowatts, and the company is expected to be put into operation in 2029-2030; 10 midstream Yagen Level 1 (approved), Yagen Level 2, Jingu and upstream hydropower plants are in the early planning stage, with a total installed capacity of 7.38 million kilowatts.

The complementary advantages of the Yalong River's water and landscape are remarkable, and growth space can be expected as the installed growth of new energy sources accelerates.

As of the first half of 2024, the company's total installed capacity of new energy was 7.438 million kilowatts. According to the company's plan, the company's new energy installed capacity will reach 14.72 million kilowatts during the “14th Five-Year Plan” period, and the installed capacity increase by 2025 is expected to exceed 7 million kilowatts. The company's construction of an integrated hydro-landscape base in the Yalong River has significant project acquisition and consumption advantages. The long-term planned hydro-landscape complementary demonstration base in the Yalong River Basin has an installed capacity of more than 40 million kilowatts of new energy, which has great potential for development.

Profit forecast and rating: SDIC Electric Power has high-quality, scarce hydropower assets in the Yalong River. Hydropower performance is expected to increase significantly with the improvement of incoming water and the release of power generation from the Liangyang Power Station; thermal power is expected to continue to benefit from performance improvements brought about by increased electricity volume and lower costs. The installed capacity of new energy sources is growing rapidly, and there is plenty of room for future growth. We predict that the company's net profit for 2024-2026 will be 8.39 billion yuan, 9.27 billion yuan, and 9.84 billion yuan respectively, corresponding growth rates of 25.1%/10.6%/6.1%, EPS 1.12 yuan, 1.24 yuan, and 1.32 yuan respectively. PE corresponding to the closing price on October 30 will be 13.77X/12.45X/11.74X, respectively, maintaining the “buy” rating.

Risk factors: Domestic and foreign coal prices have risen sharply; incoming water from the watershed where the company's hydropower project is located is poor; electricity prices in Liangyang are uncertain; the construction of the company's new energy project has fallen short of expectations.