Jidian Co., Ltd. completed a fixed capital increase of 4.185 billion yuan. The decline in the balance ratio led to a reduction in financial expenses. We raised the company's net profit forecast for 2024-26. The high yield of the project hedges the potential risk of fluctuations in electricity prices, and the company's green power installed capacity is expected to grow at high quality. Profitability is expected to continue to increase, and cash flow improvements to increase capital reserves. Maintain an “Overweight” rating.

The fixed increase capital is expected to decrease year by year. The balance ratio is expected to decrease year by year. The company's fixed increase capital is mainly used for projects such as the integration of wind and solar hydrogen and ammonia synthesis, and complementary wind power and agricultural photovoltaic power generation. After deducting reflow, the net amount raised was 2.998 billion yuan, accounting for 34% of the total project investment. At the end of September 2024, the company's balance ratio was 74%. This fixed capital increase will help the company reduce the level of leverage while expanding the scale of the project. We expect the balance ratio to decline year by year in 2024-26, to 69%/65%/63%, respectively. Financial expenses are second only to electricity and coal procurement costs in the company's variable costs. Financial expenses in 2021-23 account for 12% to 14% of total operating costs; as the debt ratio declines, the company's financial expenses are expected to decrease simultaneously, thereby increasing profit levels.

The yield reserves room for electricity price fluctuations, and the green power business is expected to grow at a high quality, and the price of green ammonia is higher than that of gray ammonia. The actual IRR of the Fengguang hydrogen production and ammonia synthesis project raised this time is expected to be better than the 4.57% estimated by the company; the IRR for the rest of the fund-raising projects is between 10.91% and 25.35%. A higher project yield helps to cope with the risk of electricity price fluctuations after Green Power participates in marketization. As of the end of September 2024, the company's new energy installed capacity reached 10.83 GW. The total installed capacity of the fund-raising project was 1.4 GW, which is equivalent to 13% of the installed capacity. Based on the progress of the company's projects under construction, we expect the average annual growth of the company's green power installed capacity to be no less than 2 GW in 24-25.

The net profit forecast was raised. Based on the updated BPS fine-tuning target price and considering the reduction in financial expenses, we raised the company's 2024-26 net profit by 1.7%/3.0%/2.5% to 1.437/1.744/2.051 billion yuan; considering the increase in dividends, we adjusted BPS +1.8%/-0.1%/-2.1% to 4.82/5.18/5.60 yuan. Referring to the comparable 25-year PB average of 1.2x (Wind's unanimous expectation), the company's profitability was better than the industry average. The company was given 1.3 xPb in 25 years, corresponding to a target price of 6.73 yuan (previous value of 6.75 yuan, based on 1.3 xPb in 25 years).

Risk warning: The increase in coal prices exceeded expectations, the number of hours used fell, and the progress of projects under construction fell short of expectations.