Changyuan Electric Power released its three-quarter report: 3Q24 achieved revenue of 4.985 billion yuan (yoy +32.83%, qoq +33.91%) and net profit of 0.46 billion yuan (yoy +76.21%, qoq +132.78%). 1-9M24 achieved revenue of 12.931 billion yuan (yoy +21.15%) and net profit of 0.908 billion yuan (yoy +41.44%) to mother.

The company's net profit for 3Q24 exceeded our expectations of 0.25-0.312 billion yuan, mainly due to a sharp increase of 38.4% year-on-year in thermal power generation. The company plans to raise 3 billion yuan from no more than 35 specific targets, including the controlling shareholder National Energy Group, mainly for the development of new energy projects. The commissioning of thermal power projects under construction and the development of new energy projects are expected to improve the company's future performance and maintain an “gain” rating.

Hot weather in Hubei and weakening incoming water helped the company's thermal power generation capacity to exceed expectations. Since August, incoming water from Hubei Province has dropped sharply year on month. The company's hydropower generation capacity in August and September was -64.6%/-84.0% year on year, and 3Q24's hydropower generation capacity was -42.7% YoY to 0.425 billion kilowatt-hours. Due to the hot weather, the domestic electricity consumption of residents in Hubei Province increased sharply by 25.3%/50.4% year on year in August and September. When hydropower output was insufficient, thermal power generation increased 20.0%/57.8% year on year. 3Q24's thermal power generation capacity was 10.177 billion kilowatt-hours, with a year-on-year growth rate of 38.4%, exceeding the year-on-year growth rate of thermal power generation in Hubei Province (16.9%). The main reason is that the company put into operation 4 coal-fired power units last year, and the effective production capacity increased this year.

In 3Q24, the company's wind power generation capacity was +21.6% to 0.152 billion kilowatt-hours, and the year-on-year growth rate of -33.0% compared to 2Q24 was significantly restored, but photovoltaic power generation was -5.7% to 0.806 billion kilowatt-hours compared to the same period last year.

The proposed increase of 3 billion yuan is mainly used for the development of new energy projects to help increase the company's long-term performance. The company plans to increase the company's long-term performance by 3 billion yuan for no more than 35 specific targets, including the controlling shareholder National Energy Group. Among them, China Energy Group plans to purchase no less than 0.9 billion yuan and no more than 1.5 billion yuan. The number of shares to be issued this time shall not exceed 30% of the total share capital of the company before issuance, or 0.825 billion shares. Of the 3 billion yuan raised, in addition to the supplementary working capital of 0.477 billion yuan, all of the remaining funds were used for the construction of new energy base projects, Yuguang complementary photovoltaic power generation projects, and agricultural and solar complementary photovoltaic power generation projects. The “14th Five-Year Plan” company is making every effort to promote the construction of clean energy for scenery and water, and the growth of installed new energy is expected to help the company increase its long-term performance. At present, the fixed increase plan has been reviewed by the Shenzhen Stock Exchange and the registration documents approved by the China Securities Regulatory Commission have been obtained.

The target price is 5.54 yuan, maintaining the “Overweight” rating

Considering the year-on-year increase in coal-power generation in 3Q24, which exceeded expectations and the downward trend in coal prices since this year, the company's net profit due to the 2024-2026 was adjusted to 0.982/1.182/1.504 billion yuan (previous value: 0.837/1.161/1.557 billion yuan), and BPS was 3.94/4.26/4.67 yuan. Comparable average PB of thermal power/new energy generation in 2025 was 1.09/1.35x (Wind agreed), with an overall average of 1.22x. Considering that the “14th Five-Year Plan” company is making every effort to promote landscape construction, the profit contribution of new energy sources is expected to increase in the future. The 2025 target is 1.3 xPb, the target price is 5.54 yuan (previous value: 4.66 yuan), and the “increase in weight” rating is maintained.

Risk warning: coal prices exceeded expectations; electricity prices were drastically adjusted; new projects fell short of expectations; power generation fell short of expectations; fixed growth fell short of expectations.