Incident: In the first three quarters of 2024, the company achieved operating income of 44.395 billion yuan, up 4.34% year on year; realized net profit of 6.578 billion yuan, up 8.69% year on year; weighted average ROE was 11.63%, up 0.05 pct year on year; basic EPS was 0.8634 yuan, up 8.77% year on year. With 2024Q3, the company achieved operating income of 17.294 billion yuan (yoy +6.87%, qoq +33.1%); realized net profit to mother of 2.834 billion yuan (yoy +4.38%, qoq +65.9%).

Hydropower generation increased dramatically from month to month, and the Lianghekou Hydropower Station was full for the first time. From January to September 2024, hydropower generation capacity was 80.345 billion kilowatt-hours (yoy +15.52%), Q3 hydropower generation capacity was 37.024 billion kilowatt-hours (yoy +22.64%, qoq +69.17%), Yalong River Hydropower Q3 electricity capacity increased 81.9% month-on-month, and the feed-in tariff in Q3 was 0.278 yuan/kilowatt-hour (yoy -1.07%). The Yalong River Lianghekou Power Station was filled for the first time on October 25, which will help guarantee the supply of electricity this winter and spring and generate electricity from cascade power plants in the basin.

The amount of thermal power and electricity prices have declined slightly, and the average price of affordable scenery-saving projects has lowered the average price. From January to September 2024, thermal power generation capacity was 44.302 billion kilowatt-hours (yoy -0.57%), and Q3 single quarter thermal power generation capacity was 16.138 billion kilowatt-hours (yoy -5.59%, qoq +24.1%). Affected by abundant incoming water in some regions, thermal power generation space was squeezed, causing a year-on-year decline. Q3 wind power generation was 1.466 billion kilowatt-hours (yoy -7.19%, qoq -16.8%), and Q3 single quarter photovoltaic power generation was 1.284 billion kilowatt-hours (yoy +50.39%, qoq +9.6%).

In terms of electricity prices, feed-in tariffs for thermal power, wind power, and PV in the Q3 quarter were 0.459, 0.453, and 0.459 yuan/kilowatt-hour, respectively, compared to -3.16%, -0.88%, and -25.12%, respectively. The decline in PV prices over the same period was mainly due to the company's new affordable Internet access projects and peak and valley time-sharing electricity prices.

Investment advice: The advantages of each power supply complement each other, and the pace of project planning and implementation brings sustainability to growth. It is expected to achieve operating income of 61.982, 66.539, and 69.568 billion yuan in 2024-2026, and net profit to mother of 7.773, 8.789, and 9.436 billion yuan, up 15.9%, 13.1%, and 7.4% year-on-year. The corresponding EPS is 1.04, 1.18, and 1.27 yuan, and the corresponding PE multiples are 14.9, 13.1, and 12.2X, maintaining the “gain” rating.

Risk warning: Incoming water falls short of expectations, risk of coal price fluctuations, risk of electricity price falling beyond expectations, natural disasters, electricity demand falling short of expectations, uncertain risks caused by implementation of relevant policies, and new project processes falling short of expectations.