Based on the company's wind power growth since 2H24, the country is actively addressing the new energy subsidy receivable by power generation companies and the completion of the 14th Five-Year New Energy Installation Target. We have raised or lowered the company's 2024-26 net profit from renewable energy to mother by 9.2/3.9/ 9.0%. Optimistic about the profit quality of the company's assets and future transformation and development, and maintain a “buy” rating.

The year-on-year growth rate of 2H24's wind power generation increased significantly, increasing the company's 24E New Energy profit by 3Q24, and the company's wind power generation capacity was +26.3% to 9.7 billion kilowatt-hours. Of these, wind power generation in September was significantly +52.6% to 3.6 billion kilowatt-hours. We think it may be due to: 1) the improvement in wind conditions; 2) the company's new grid-connected wind power installation. From January to October 2024, the company's cumulative wind power generation capacity was +13.7% to 35.8 billion kilowatt-hours. The year-on-year growth rate increased significantly compared to 6.9% of 1H24. Therefore, we raised the company's 2024E wind power generation by 3.3% to 43.2 billion kilowatt-hours. At the same time, considering that the company's new energy depreciation scale in 2023 (1.643 billion yuan) is already large, the country is actively resolving the issue of new energy subsidy accounts receivable from power generation companies. The company's 2024E renewable energy (mostly new energy) net income margin was increased by 3.4 pp to 38%, thereby increasing the company's net profit from renewable energy sources by 9.2% to 9.18 billion yuan.

The company's placement of 0.1985 billion shares has been completed, and the company's placement of 0.1985 billion shares was completed on 10/30 through the shareholders' meeting resolution on 12/2. After completion, the company's total share capital was +4.1% to 5.00894 billion shares. The issuance of 0.168 billion shares to Joint Trading Co., Ltd. (a wholly-owned subsidiary of China Resources Group) was approved by the shareholders' meeting on 12/2 (approval rate 94.6%). The company will further advance the issuance process, which is still not fully completed. We estimate that the immediate EPS will be diluted by 7.08% after the transaction is completed, but the impact of dilution is expected to continue to weaken as profits increase due to the commissioning of new projects.

Target price of HK$30.69, maintaining “Buy” rating

We adjusted the company's 2024-26 renewable energy net profit of +9.2%/+3.9%/-9.0%. The 2025 increase was mainly due to an increase in the profit margin base compared to the same margin decline in 2024; the 2026 reduction mainly took into account the high pressure on the company to complete the 14th Five-Year New Energy Installation Target, and lowered the 2025 NEV installation forecast (the small impact on profit for the year assumes that most installations will be put into operation in Q4).

Considering the recent low level of monthly auctions and spot electricity prices in Guangdong, the company lowered its 2024-26 thermal power price forecast by 0.8/3.9/ 4.9%. Based on the reduction of the company's 2024-26 net profit forecast of 1.3/5.0/ 9.2% to HK$14.8/15.8/17.7 billion. Referring to coal-power/renewable energy, the 2025E PB/PE Wind unanimously anticipated 0.79/14.9x, giving the company 0.9/18x 2025E PB/PE (parent equity/core profit: HK$17.9/10.5 billion). Compared with the company's premium, the profitability of the company's thermal power and new energy assets is better. The total market value is discounted by 25% to reflect the potential impact of the new energy spin-off and listing. The target market value is HK$153.7 billion, and the target price is HK$30.69 ( The impact of the issuance on total share capital is not considered; pre-target price: HK$29.95, based on 0.85/17x 2025E PB/PE).

Risk warning: 1) The increase in coal prices exceeded expectations; 2) the number of hours used was lower than expected; 3) the market-based electricity price was lower than expected; 4) the implementation of the spin-off listing did not match expectations.