Incident: From January to September 2024, the company achieved operating income of 10.485 billion yuan, up 1.22% year on year; realized net profit of 1.773 billion yuan, up 8.38% year on year; weighted average ROE was 7.89%, down 0.04 pct year on year; basic EPS was 0.7 yuan, down 7.69% year on year. In the Q3 quarter, the company achieved operating income of 3.82 billion yuan (yoy -4.13%, qoq +6.8%) and realized net profit of 0.585 billion yuan (yoy -16.6%, qoq -11.7%)

Wind resources were weak in the third quarter, and wind power generation declined year-on-month. In the first three quarters of 2024, the company completed 17.623/16.758 billion kilowatt-hours of electricity generation, up 0.37%/0.47% year on year; completed 7.3991 million tons of heat supply, up 9.05% year on year. In the 2024Q3 quarter, the company completed 6.464/6.15 billion kilowatt-hours of power generation, a year-on-year decrease of 3.51%/3.55%; completed heating capacity of 2.5344 million tons, an increase of 3.09% year-on-year. In terms of power sources, wind resources were weak in the Q3 quarter, and wind power generation declined year-on-month (yoy -1.34%, qoq -11.57%). In Q3, coal-fired power generation increased month-on-month compared to the second quarter, with a significant year-on-year decline (yoy -20.19%, qoq +12.96%); natural gas power generation increased significantly (yoy +9.66%, qoq +61.27%).

The main business operation was steady, and interest rates increased slightly in the first three quarters. In the first three quarters of 2024, the company's sales/management/R&D/finance expense ratios were 0.21%, 2.03%, 1.03%, and 3.66%, respectively. The total cost ratio was 6.94%, which is basically the same as 7.4% in the same period last year. In the first three quarters of 2024, the company's gross sales margin/net margin was 21.99%/20.33%, up 3.25 pcts and 1.81 pcts year-on-year; in Q3, gross margins fell 3.77 pcts and 3.98 pcts month-on-month due to declining power generation.

It controls shareholding in various energy companies, and has abundant reserve projects. As of 2024H1, the company holds a total installed capacity of 6.0453 million kilowatts, of which wind power/natural gas power generation/coal-fired pure condensation power generation/photovoltaic power generation 180.90/152.80/1.3411/1.32/0.0472 million kilowatts; the main projects under construction include: Fuding Thermal Power Plant Expansion Project, Fujian Xianyou Mulan Pumped Storage Power Plant Project, Fujian Huaan Pumped Storage Power Plant Project, Fujian Huaan Pumped Storage Power Plant Project, Quanhui Petrochemical Industrial Zone 2×660M supercritical thermal power generation Production engineering projects; holdings 80% of the Changle offshore J-zone offshore wind farm projects have been approved, with a construction capacity of no more than 656 megawatts and a total investment of 6.588 billion yuan. The company is gradually expanding in the energy sector. Participating companies include thermal power, nuclear power, and wind power companies, and the return on investment is expected to increase steadily.

Investment advice: The fourth quarter is a traditional windy season, and the company's power generation is expected to increase month-on-month. We expect the company to achieve operating income of 14.997, 15.68, and 16.738 billion yuan in 2024-2026, up 2.1%, 4.6%, and 6.7% year on year; net profit to mother of 2.846, 3.045, 3.228 billion yuan, up 8.5%, 7%, 6% year on year; corresponding EPS of 1.07, 1.14, 1.21 yuan; corresponding PE multiples of 8.8, 8.2, 7.7X.

Maintain an “Overweight” rating.

Risk warning: the incoming wind falls short of expectations, the risk of electricity prices falling beyond expectations, natural disasters, electricity demand falling short of expectations, uncertain risks brought about by the implementation of relevant policies, and the new project process falling short of expectations.