Q3 Net profit to mother surged 98%, maintaining a “buy” rating

The company released its quarterly report for 2014. In the first three quarters, it achieved revenue of 295.139 billion yuan, +3.44% year over year, net profit to mother of 3.604 billion yuan, +17.28% year on year, net profit of 2.846 billion yuan after deducting non-return to mother net profit of 2.846 billion yuan, or -1.35% year on year. Among them, 24Q3 achieved revenue of 100.877 billion yuan in a single quarter, +8.24% year over year, net profit to mother of 0.822 billion yuan, +97.81% year over year, after deducting net profit of 0.518 billion yuan without return to mother, or -3.43% year on year. The pressure on the third quarter results was released, and the new energy and integrated smart energy business grew strongly. We maintained the 24-26 net profit forecast of 8.7, 9.5, and 10.5 billion yuan, and maintained a “buy” rating.

Q3 Expense rates improved slightly, and net interest rates increased significantly

24Q1-3's gross margin was 11.54%, +0.59pct year on year. Among them, the gross margin for single Q3 decreased by 0.7 pct to 10.28%. The 24Q1-3 company's cost rate for the period was 8.31%, +0.6pct year-on-year. Among them, the sales/management/R&D/finance expense ratios were +0.06/-0.1/+0.37/+0.27pct, respectively. The total asset and credit impairment for the first three quarters was 1.32 billion, up about 0.58 billion from year on year, and net investment income increased 0.57 billion to 0.455 billion year on year. Under the combined influence, the company's net interest rate was 2.07%, +0.06 pct year on year. Among them, the net interest rate for a single Q3 increased 0.27 pct to 1.55% year on year. The net CFO of 24Q1-3 was -12.518 billion, with a year-on-year decrease of 2.229 billion in outflows. The current payout ratio was 92.99%/97.4%, respectively, with a year-on-year change of +6.24pct/+6.25pct.

Traditional energy engineering orders continue to grow at a high rate, and new orders under the Belt and Road Initiative continue to be booming

24Q1-3 signed new orders of 988.859 billion yuan, or +5.03% year over year. Among them, the amount of new contracts signed for the new energy and integrated smart energy business increased 19.4% year on year, the amount of new industrial contracts increased 128.79% year on year, and the traditional energy engineering construction business represented by thermal power, hydropower, transmission and transformation, and nuclear power increased 46.38% year on year. The National Energy Administration announced that the M1-9 power grid investment project completed was +21.1% to 398.2 billion yuan. The power grid investment boom continues, and the company's traditional energy projects are expected to continue to maintain a high growth trend. By region, new domestic/foreign orders were signed at 753.954/234.905 billion yuan, +4.98%/+5.19%. Among them, the amount of new contracts signed by the “Belt and Road” co-construction countries increased 32.17% year over year, and signed a number of benchmark projects such as the Saudi PIF Phase IV Haden 2GW PV Project, Iraq's Ratawi 1GW PV Power Plant Project, and the Laos Xekong Raman 1GW PV Project.

The increase in holding by controlling shareholders shows confidence in development. Continuing to be optimistic about the company's medium- to long-term development, the company announced on October 14 that China Energy Construction Group, the controlling shareholder, plans to increase its holdings through centralized bidding transactions at the Shanghai Stock Exchange within 6 months from October 15. The proposed increase in holdings is not less than 0.3 billion yuan or higher than 0.5 billion yuan. The increase in holdings does not set a price range. The increase in controlling shareholders' holdings shows confidence in development and continues to be optimistic about the strong momentum of the company's medium- to long-term development.

Risk warning: Investment in electricity and infrastructure fell short of expectations; new orders declined; non-public offerings fell short of expectations, etc.