3Q24 results are in line with our expectations

The company announced 3Q24 results: revenue of 3.65 billion yuan, +18.7% year on year; net profit to mother 0.066 billion yuan, -3.1% year over year, in line with our expectations.

3Q24's electricity generation capacity is 2.25 billion kilowatt-hours, YoY -2.7%, natural gas sales 0.93 billion square meters, YoY +21.4%, of which LNG sales volume is 0.26 billion square meters and YoY +176%; 1-3Q24 has an average feed-in price of 0.44 yuan/kwh, the same as the previous year.

The company simultaneously announced the company's strategic adjustment plan: In the future, the company will continue to focus on wind power generation and natural gas related industries, concentrating resources on the construction and operation of onshore and offshore wind farms, LNG terminals and receiving stations, long-term natural gas pipelines, and urban gas and gas power plants. To this end, the company plans to gradually sell the existing photovoltaic business (by the end of 1H24, the company is operating about 126 MW of PV installed capacity), thereby concentrating resources to expand the main business and further enhance the company's strength and core competitiveness.

Development trends

The scale of capital expenditure in the wind power sector is likely to remain high. 1-3Q24's capital expenditure was 4.6 billion yuan, which is basically the same as the previous year. Looking ahead, considering that the company has many offshore wind power projects planned and under construction, we determine that the capital expenditure scale of the company's wind power business may increase from about 2 billion yuan in 2023 to 6-7 billion yuan/year.

Tangshan LNG terminal profits are expected to improve steadily in 2025. Considering the company's current long-term contract implementation situation (1 million tons/year) and international LNG spot supply and demand relationships, we believe it may be difficult to guarantee that the load rate of the Tangshan LNG terminal will reach a high level in 2025. Looking ahead, we judge that the company will ensure a steady improvement in the profits of the Tangshan LNG terminal by providing new business models such as providing storage tank leasing to the outside world, opening a window period, and providing proxy gas storage services.

Profit forecasting and valuation

The profit forecast for 2024 and 2025 remains unchanged. The current A share price corresponds to 2024/2025 13.0x/11.1x P/E. The current H share price corresponds to 2024/2025 5.3x/4.4x P/E. A/H shares all remained outperforming the industry ratings, but due to the upward shift in the valuation center of A/H shares, we raised the target price of A/H shares by 12.5%/14.3% to HK$9.0/4.0. A shares correspond to 15.2x/13.0x P/E in 2024/2025, which has 17.5% upside compared to the current stock price; H shares correspond to 6.1x/5.1x P/E in 2024/2025, with 15.3% upside compared to the current stock price.

risks

Natural gas prices have risen sharply, and the decline in green electricity prices has exceeded expectations.