The year-on-year decline in power generation affected the continued year-on-year decline in earnings in the 3rd quarter. The company's profit for the 3rd quarter (not counting interest on perpetual bonds) fell 46% year on year to 0.11 billion yuan (RMB, same below), and the total profit for the first three quarters fell 17% year over year to 1.87 billion yuan, reaching 77% of our forecast for the full year (81% for the same period last year). The company's total power generation decreased by 1.6% year-on-year in the 3rd quarter, with wind power/photovoltaic power generation -4.8%/+33.1% year-on-year. The weak profit side is mainly affected by weak wind speed this year. Revenue for the 3rd quarter fell slightly by 1% year on year. Coupled with the increase in depreciation after the installation was added, sales costs during the period rose 5% year on year, causing gross margin to drop 17 percentage points to 21% month-on-month in the 3rd quarter.
The company's debt ratio was well controlled during the period. We maintain the company's forecast of 1.8/2.1/2.5 gigawatts of additional wind/light installed capacity at the end of 2024/25/26. The company's net debt/total equity ratio for the first three quarters was 133%, down from 150% at the end of 2023. Based on the current progress of the company's installed equipment construction, we expect the company's net debt/total equity ratio to decrease by 7 percentage points to 143 percent year-on-year for the full year of 2024.
At present, the increase in valuation is still faster than the improvement in profit, and remains neutral. We keep our profit forecast unchanged. Since the improvement on the profit side of the company is still unclear, we maintain the valuation standard of 5.7 times the 2025 forecast price-earnings ratio (5-year historical average) and target price of HK$1.92 unchanged. Currently, the company's valuation is about 7 times the 2025 price-earnings ratio, which is slightly above a reasonable level. The recent increase in valuation is still faster than the profit improvement. We believe that only by breaking through the company's installed capacity or dividend payments can it maintain a higher valuation and maintain a neutral rating.
