Actual shareholders' net profit increased 8.0% year-on-year in 24Q3

24Q3 results are in line with expectations. Total revenue increased 18.7% year over year to 3.65 billion yuan (RMB, same below), and shareholders' net profit fell 3.1% year over year to 65.77 million yuan. After deducting non-recurring profit and loss (such as subsidies), actual shareholders' net profit increased 8.0% year over year to $62.39 million. Total revenue for January-September 2024 rose 20.3% yoy to 15.79 billion yuan, and shareholders' net profit fell 0.7% yoy to 1.5 billion yuan. Actual shareholders' net profit increased slightly by 0.04% year-on-year to 1.48 billion yuan during the same period.

Wind power generation declined slightly

Affected by poor wind resources, wind power generation in the first three quarters of 24Q3 and FY24 decreased by 2.7% and 3.4% year-on-year to 2,253 GWh and 9,697 GWH, respectively. Taking into account wind resources and installed capacity, we expect FY24 wind power generation to drop 7.1% year over year to 13,079 GWH, but FY25-26 will increase 15.2% and 18.8% respectively to 15,069 GWh and 17,902 GWH, respectively.

24Q3 gas sales increased 21.4% year on year

The gas sector performed relatively well. In the first three quarters of 24Q3 and FY24, gas sales increased 21.4% and 39.7% year-on-year respectively to 935 million cubic meters and 3952 million cubic meters. The gross margin of sales rose from 0.31 yuan in 23Q3 to 0.37 yuan in 24Q3. Furthermore, for the Tangshan LNG project, which began operation last year, the company has signed long-term gas supply agreements with various downstream operators such as Binhai Investment (2886 HK), which is owned by the Tianjin Municipal Government. The company is confident that the project will be profitable this year. Overall, we expect the company's FY24-26 gas sales to increase by 34.3%, 18.2%, and 10.3% year-on-year to 6.05 billion, 7.15 billion, and 7.89 billion cubic meters, respectively.

Maintain a “buy” rating

Referring to the 24Q3 results, we slightly lowered FY24-26 shareholders' net profit forecasts by 0.4%, 1.3%, and 4.0%, respectively. Due to the decline in market risk in recent months, the company should be able to obtain a higher valuation. We raised our target price-earnings ratio for FY25 from 5.5 times to 6.0 times, and accordingly raised our target price for H shares from HK$4.02 to HK$4.33, corresponding to 22.2% upside.

Maintain a “buy” rating.

Risk warning: (1) risk of accounts receivable, (2) sharp drop in grid-connected electricity prices, and (3) rising natural gas costs.