Incident: Longyuan Electric Power announced its 2024 Q3 results, and the company's performance for the 3rd quarter improved marginally. The company continues to increase the allocation of high-quality new energy assets and dispose of existing thermal power assets. Since the beginning of the year, the company has added 2.7 GW of new energy installed and disposed of 1.2 GW of thermal power assets. The company has announced its intention to acquire 2GW high-quality new energy assets of the controlling shareholder National Energy Group. At the same time, grasp the construction window for large scenic bases and offshore wind power, etc., and increase the installation of high-quality new energy assets. The company's current valuation is about 7 times the 2025 PE. We believe that the company is actively grasping the wind power construction window and is expected to inject assets from the National Energy Group, and there is room for improvement in valuation.

Report summary

Longyuan Electric Power's performance in the first three quarters of 2024 improved marginally compared to the first half of the year. Longyuan Electric Power announced operating results for the 3rd quarter. In the third quarter, the company's revenue decreased by 9.8% year on year to 7.47 billion yuan, the company's operating profit increased 13.3% year on year to 2.89 billion yuan, and the company's net profit increased sharply by 29.9% year on year to 1.65 billion yuan. In the 1-3 quarter, the company's revenue decreased 6.4% year on year to 26.35 billion yuan, the operating profit for the 1st quarter decreased 10% year on year to 10.04 billion yuan, and the company's net profit decreased 11.4% year on year to 5.67 billion yuan. Looking at the third quarter alone, net profit increased by 29.9%, and the growth rate improved significantly compared to the first half of the year. After deducting non-recurring profit and loss, net profit returned to mother increased by more than 10% in the third quarter. There was a marked improvement in the company's margin of profit in the third quarter.

The company continues to upgrade new energy installations and dispose of thermal power assets. As of September 30, the installed capacity of the company's holding was 37 GW, of which the installed capacity of Wind Power Holdings was 28.4 GW, the installed capacity of Thermal Power Holdings was 660 MW, and the installed capacity of other renewable energy holdings such as photovoltaics was 8 GW. From January to September, the company added 2.7 GW of installed capacity, including 626 MW of wind power and 2 GW of photovoltaics. The company has completed the transfer of property rights to Jiangyin Sulong Thermal Power Company, reducing the installed capacity of controlled thermal power by 1215 MW and photovoltaics by 26 MW. The company currently holds 660MW of thermal power and may complete further transfers in the future. The company is currently actively grasping the time window for the launch of projects such as the National Scenic Base and offshore wind power. It is expected to increase the installed capacity of wind power holdings, and is expected to continue to increase the installed capacity of new energy holdings during the 14th Five-Year Plan period.

Q3 Power generation increased year-on-year, and wind power generation maintained an upward trend in October. In the 1-3 quarter, the company's power generation capacity increased 2.4% year on year to 56846.6 gigawatt-hours. Affected by wind resources, wind power generation fell 1.8% year on year to 43861.5 gigawatt-hours. Looking at the third quarter alone, the company's power generation capacity increased 6.4% year on year to 16764.7 gigawatt-hours, and power generation capacity increased 6.2% year on year to 12276.9 gigawatt-hours. Wind resources improved month-on-month in the third quarter, and the company's wind power generation increased year-on-year. In October, the company's power generation maintained a three-quarter growth trend. In October, the company's power generation capacity increased 8.2% year on year to 5,897 gigawatt-hours. Of these, wind power increased 24.35% year on year to 5245 gigawatt-hours, and photovoltaics and other renewable energy sources increased 67.7% year on year to 652.8 gigawatt-hours. From January to October, the company's cumulative power generation increased 2.9% year-on-year to 62743.9 gigawatt-hours.

Longyuan Electric Power acquired the new energy generation assets of the controlling shareholder National Energy Group. The company announced that it intends to acquire eight new energy power companies under the National Energy Group, including Tengxian Energy Development, Gansu Wind Power, and Wuwei New Energy. It is another acquisition of controlling shareholders' assets after Longyuan Electric Power's A-share listing, reflecting the controlling shareholders' support for the listed companies. The total installed capacity of the new energy power company that Longyuan Electric Power Co., Ltd. plans to acquire this time is 2.03 GW, of which the installed capacity of new energy power generation is 1.45 GW, and the installed capacity of the new energy power generation under construction is 0.58 GW; including 1.75 GW of wind power and 0.28 GW of photovoltaic installed capacity. The purchase price for the project was RMB 1.69 billion. We expect that in the future, Longyuan Electric Power will continue to integrate the controlling shareholder National Energy Group's high-quality new energy generation assets.

Investment Proposals Longyuan Electric Power is the flagship listing platform for NEC's new energy power operation. 1-3Q's net profit decreased 11% year over year to 5.67 billion yuan. There was a marked marginal improvement in the Q3 net profit growth rate. According to Bloomberg's unanimous expectations, net profit for 2024 and net profit for 2025 were 6.64 billion yuan and 7.5 billion yuan respectively, up 7% and 10% year-on-year. Currently, Longyuan Electric Power's 2025 valuation is about 7 times PE. We believe that the company is actively grasping the wind power construction window and is expected to inject assets from the National Energy Group, and there is room for improvement in valuation.

Risk warning: The growth rate of electricity consumption in society is slowing down; abandoning wind and light; wind resources fluctuate.