Energy-saving wind power released three quarterly reports: 3Q24 achieved revenue of 1.168 billion yuan (yoy +1.1%, qoq -11%) and net profit of 0.307 billion yuan (yoy +0.1%, qoq -31%). 1-3Q24 achieved revenue of 3.811 billion yuan (yoy -0.4%), net profit of 1.18 billion yuan (yoy -1.2%), deducting non-net profit of 1.154 billion yuan (yoy +0.2%). The company's net profit for the third quarter was better than our expectations for mid-September (2.41 to 0.267 billion yuan), thanks to a year-on-year increase in power generation. 3Q24 power generation increased year-on-year, and net electricity profit continued to decline. Accounts receivable remained flat month-on-month at the end of September, benefiting from the acceleration of green power subsidy payments. Maintain an “Overweight” rating.

3Q24 power generation increased year-on-year, and net electricity profit continued to decline. As of the end of September, the company's total installed wind power capacity was 6.066 GW, an increase of 399 MW from the beginning of the year, and more than the full year scale for 23 years; the installed operating capacity was 5.936 GW, an increase of 582 MW compared to the beginning of the year; and 1.52 GW was added to the 1-3Q index. The company's 3Q24 power generation yoy +5.5%, which is significantly faster than 2Q (-6.5%); among them, onshore wind power yoy +5.1% and offshore wind power yoy +12.9%. Due to the combined effects of structural changes in the installed area and changes in the market electricity discount margin, the company's 3Q24 gross margin yoy-4.2pp to 46.0%, resulting in the company's 3Q24 net profit margin yoy-0.3pp to 26.3%. Excluding the impact of investment income, we estimate that the 3Q24 company's overall net electricity profit YOY -4.3% to 0.115 yuan, continuing the 2Q year-on-year downward trend.

Considering market-based transactions and new installations, we expect the 4Q24 quantitative trend to continue.

Accounts receivable at the end of September were basically flat month-on-month, benefiting from the acceleration of green power subsidy payments. With some green power subsidy payments, the company's accounts receivable at the end of September were basically the same as at the end of June, accounting for qoq-0.8pp to 40.3% of net assets, reversing the quarterly upward trend since the end of '22. 9M24's operating cash flow was +6% to 2.55 billion yuan, of which 3Q24 yoy +17% to 1 billion yuan. The company is expected to significantly benefit from the accelerated repayment of green power subsidies, improving the quality of cash flow and reducing the risk of impairment. We expect operating cash flow to increase year-on-year in '24.

The profit forecast was slightly lowered. Based on the 25-year target valuation increase, taking into account the increase in wind power installed capacity but the number of power generation hours, we forecast the company's net profit to mother for 24-26 was 1.566/1.694/1.762 billion yuan (previous value 1.582/1.714/1.845 billion yuan), a year-on-year growth rate of 3.6%/8.2%/4.0%, and BPS of 2.75/2.92/3.10 yuan. According to Wind's consistent expectations, the company's 25-year PB average was 1.3x. The company's 24-26 return to mother profit CAGR (5.3%) was lower than the industry average (18.1%), giving the company 1.2xPb for 25 years, with a target price of 3.5 yuan (previous value of 3.3 yuan, based on 1.2xPb in 24).

Risk warning: Competition for wind power generation intensifies; risk of wind abandonment and electricity restrictions; worsening subsidy arrears.