Description of the event

The company released its three-quarter report for 2024: in the third quarter of 2024, the company achieved operating income of 17.294 billion yuan, an increase of 6.87% year on year; realized net profit to mother of 2.834 billion yuan, an increase of 4.38% year on year.

Incident comments

There was a high increase in incoming water supply, and revenue grew steadily in the third quarter. Since the second half of the year, incoming water from the Yalong River basin has remained abundant. In the third quarter, the company's hydropower generation capacity was 37.024 billion kilowatt-hours, an increase of 22.64% over the previous year. Although it may be affected by the year-on-year decline in market-based electricity prices, the average feed-in electricity price for hydropower in the third quarter was 0.278 yuan/kilowatt-hour, a year-on-year decrease of 1.07%, but it is expected that the high increase in hydropower production will dominate hydropower operations. In terms of thermal power, the company's thermal power generation reached 16.138 billion kilowatt-hours in the third quarter due to large hydropower generation squeezing thermal power output, a year-on-year decrease of 5.59%. The average feed-in tariff for thermal power in the third quarter was 0.459 yuan/kilowatt-hour, a year-on-year decrease of 3.16%. It is worth noting that if the higher feed-in tariffs for the newly put into operation in the Qinzhou Phase II project are excluded, the price of thermal power will drop even more. In terms of new energy sources, since the incoming wind was still weak in the third quarter, the company's wind power generation reached 1.466 billion kilowatt-hours, a year-on-year decrease of 7.19%; photovoltaic power generation was 1.284 billion kilowatt-hours, an increase of 50.39% over the previous year. However, due to the continued decline in market-based electricity prices and the impact of new affordable electricity prices being lower than the original project, the average feed-in tariff for wind power decreased by 0.88% in the third quarter, and the average feed-in tariff for photovoltaics decreased by 25.12%. Overall, the company achieved 55.913 billion kilowatt-hours of power generation in the third quarter, an increase of 12.46% over the previous year; the average feed-in price was 0.336 yuan/kilowatt-hour, a year-on-year decrease of 5.62%.

Driven by electricity growth, the company achieved revenue of 17.294 billion yuan in the third quarter, an increase of 6.87% over the previous year.

Upward depreciation affects costs, and investment returns drive performance growth. The company's operating cost in the third quarter was 10.128 billion yuan, up 11.73% year on year. The main influencing factors of the company's cost-side growth were: 1) The average Q5500 coal liquidation price in the third quarter decreased by about 18.10 yuan/ton compared to the same period last year. However, if the power plant's coal inventory for about 20 days is estimated according to the reference period from mid-June to mid-September, the 2024 average rose by about 13.58 yuan/ton compared to 2023, so the year-on-year increase in coal prices may have increased fuel costs for thermal power ; 2) Compared with the same period last year, the company added the Qinzhou Phase II thermal power project in the third quarter, and the installed capacity of new energy sources also increased year-on-year, leading to an increase in depreciation and operation and maintenance costs. Affected by this, the company's gross profit for the third quarter was 7.165 billion yuan, up 0.67% year on year. Among them, gross profit from hydropower is expected to increase year on year, while gross profit from thermal power and new energy is expected to decline year on year. As the company's asset structure continues to be optimized, the company's financial expenses for the third quarter were 0.778 billion yuan, a year-on-year decrease of 21.51%. With the improvement in the operations of participating companies, investment income for the third quarter was 0.481 billion yuan, up 133.53% year-on-year, and profit increased by 0.275 billion yuan. However, in the third quarter, the company's accrued asset and credit impairment totaled 0.199 billion yuan, and the impairment increased by 0.149 billion yuan over the same period last year. Overall, the company achieved net profit of 2.834 billion yuan in the third quarter, an increase of 4.38% over the previous year, under the guidance of an increase of investment income and a decline in financial expenses.

Introduce social security to increase dividends and highlight long-term excellent value. The company previously announced that it plans to increase the fixed amount of no more than 7 billion yuan to social security. The large participation of social security funds is expected to drive more long-term capital and patient capital, and is expected to form a solid support for the company's long-term value. Furthermore, the company will increase its dividend commitment from 50% to 55% over the next three years, demonstrating the importance the company attaches to shareholder returns. With the gradual commissioning of subsequent projects under construction, the company's dividends are expected to gradually increase.

Investment advice: According to the latest data, we expect the company's corresponding EPS in 2024-2026 to be 1.00 yuan, 1.11 yuan, and 1.24 yuan, respectively, and the corresponding PE will be 15.59 times, 14.01 times, and 12.49 times, respectively, maintaining a “buy” rating.

Risk warning

1. The risk that the progress and benefits of the commissioning of new construction projects fall short of expectations;

2. Wind conditions and lighting resources fall short of expected risks.