Key points of investment

Incident: The company announced the 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 56.986 billion yuan, an increase of 1.6%; net profit to mother of 8.934 billion yuan, a decrease of 4.22%; net profit of 8.866 billion yuan after deducting non-return net profit of 8.866 billion yuan, a decrease of 3.02%; the weighted average ROE decreased by 1.14 pct year on year to 9.57%.

Net profit attributable to mother was +8.1% month-on-month in the third quarter. In the first three quarters of 2024, the company achieved revenue of 56.986 billion yuan, an increase of 1.6%; net profit to mother was 8.934 billion yuan, a decrease of 4.22%. Revenue for the third quarter of 2024 was 19.545 billion yuan, -1.25% YoY, +0.47% month-on-month, net profit to mother 3.052 billion yuan, -7.10% YoY, +8.10%.

Nuclear power output was +1.9% month-on-month in the third quarter, and electricity emissions returned to normal after Fuqing No. 4 minor repairs were completed.

The 2024Q1-3 nuclear power feed-in capacity was 126.783 billion kilowatt-hours, -2.79% year over year, while the 2024Q3 single-quarter feed-in electricity volume was 43.358 billion kilowatt-hours, -5.62% YoY, +1.93%. From the perspective of electricity volume, the 2024Q1-3 nuclear power feed-in capacity decreased by 3.636 billion kilowatt-hours over the same period last year, of which Fuqing Nuclear Power decreased by 3.909 billion kilowatt-hours over the same period last year. Fuqing Nuclear Power affected the company's release of nuclear power. The decline in Fuqing's nuclear power generation was mainly due to 2 minor repairs to Fuqing Unit 4. As of 2024/10/10, the company announced that Fuqing No. 4 minor repairs have been completed and the crew has been restarted.

New energy sources maintained a high year-on-year increase, and there was a relative slowdown in the third quarter compared to the previous quarter. The 2024Q1-3 new energy feed-in capacity was 24.338 billion kilowatt-hours, maintaining a high increase of +48.21% over the same period last year. 2024Q3's new energy feed-in electricity volume in a single quarter was 8.468 billion kilowatt-hours, +40.20% year over year, and -1.32% month over month, slowing from quarter to quarter.

Fee control was good, and financial expenses fell year on year. Expenses fell 1.34% year-on-year to 8.624 billion yuan during the first three quarters of 2024, and the cost rate fell 0.45 pct to 15.13% during the period. Of the 0.12 billion yuan period expenses that fell year on year, R&D expenses decreased by 0.28 billion yuan year on year, financial expenses decreased by 0.11 billion yuan year on year, sales expenses decreased by 0.02 billion yuan year on year, and management expenses increased by 0.3 billion yuan year on year.

Increased capital expenditure supports deterministic growth. In the first three quarters of 2024, the company 1) net cash flow from operating activities was 32.845 billion yuan, a decrease of 4.36%; 2) net cash flow from investment activities - -61.486 billion yuan, an increase of 47.87%; 3) net cash flow from financing activities was 28.537 billion yuan, an increase of 259.17% year on year.

The company's 14 billion yuan fixed increase plan has been accepted by the Shanghai Stock Exchange. Social security and controlling shareholders subscribe in full cash to support continued growth.

There are plenty of nuclear power projects, and industry leaders will soon usher in accelerated commissioning. In August 2024, the company's Jiangsu Xuwei nuclear power project was approved, including 2 third-generation units and 1 four-generation unit, for a total of 0.3076 million kilowatts for 3 units. As of 2024/6/30, the company's nuclear power unit was 13.92 million kilowatts, and the unit to be started was 6.72 million kilowatts. After all units were put into operation, the definitive increase in scale reached 87%. Looking at the pace of operation, the company expects to put into operation 121/121/139/6.32/2.5/1.29 million kilowatts in 2024-2029, respectively. The normalization of nuclear power approval space has been released, and the projects under construction are about to enter the accelerated commissioning period.

Profit forecast and investment rating: Short-term unit repairs affect electricity release. We adjusted the company's net profit to the mother in 2024-2026 from 11.4/12.5/13.6 billion yuan to 10.7/11.7/12.7 billion yuan, an increase of 1%/9%/9%, and 2024-2026 PE17.7/16.3/14.9 times (2024/10/30). There are plenty of leading projects in the industry. They are about to enter a period of accelerated commissioning and maintain a “buy” rating.

Risk warning: Electricity prices fluctuate, installation progress falls short of expectations, nuclear power unit operation risks.