维持“增持”评级：考虑到来水及部分外送消纳区域市场化电价下行等因素，下调2024~2026 年EPS 至1.34/1.43/1.50 元（原值1.43/1.51/1.60 元）。考虑公司作为水电龙头且分红比例较高的估值溢价，维持目标价34.32 元，维持“增持”评级。Introduction to this report:
The company's pessimistic expectations for 4Q24 electricity came to fruition, energy storage reached a new high guarantee of 1Q25E electricity, and the relative value of stable dividends is expected to continue to rise in a low interest rate environment.
Key investment points:
Maintain the “gain” rating: Taking into account factors such as incoming water and falling market-based electricity prices in some outbound consumption regions, EPS was lowered to 1.34/1.43/1.50 yuan from 2024 to 2026 (original value 1.43/1.51/1.60 yuan). Considering the company's valuation premium as a hydropower leader with a high dividend ratio, the target price was maintained at 34.32 yuan, and the “increase in weight” rating was maintained.
Incident: The company announced 4Q24 that domestic hydropower generation capacity was 60.1 billion kilowatt-hours, -17.6%; including Wudongde Power Station 8.47 billion kilowatt-hours, +3.8%; Baihetan Power Station 14 billion kWh, -6.0%; Xiluodu Power Station 13.1 billion kilowatt-hours, -12.3%; Xiangjiaba Power Station 6.77 billion kilowatt-hours, -13.6% year over year; Sanxia Power Station 14.4 billion kilowatt-hours, -6.5% year on year ; Gezhouba Power Station was 3.41 billion kilowatt-hours, -24.5% YoY.
The electricity level is pessimistic, and the boot is expected to land, and the energy storage reached a record high to guarantee 1Q25E electricity. We estimate that the decline in the company's 4Q24 power generation capacity was mainly due to: 1) the year-on-year decline in incoming water from the lower reaches of the watershed: the total incoming water volume of 4Q24 Wudongde/Three Gorges Reservoir was about 23.5/61 billion cubic meters, +9.2%/-26.1% YoY; 2) Cascade Reservoir energy storage increased year over year: According to the company's official WeChat account, as of December 27, 2024, the energy storage capacity of the company's cascade reservoirs reached a record high of about 30.8 billion kilowatt-hours in the same period.
We expect good energy storage conditions to guarantee the company's 1Q25E's electricity during the peak winter season. The 4Q24 company transferred shares in Hubei Qingneng Group and received a transfer of 3.4 billion yuan (the book value of Hubei Qingneng's shares was 2.65 billion yuan as of the end of 1H24). We speculate that the investment income obtained from the equity transfer is expected to partially hedge against the pressure on the performance of the main hydropower business under electricity volume.
In an environment of low interest rates, the dividend value is prominent. We believe that the steady increase in the company's dividend amount is invaluable. Against the backdrop of declining returns required by investors, the relative value of the company's stable dividend is expected to increase (see the March 2024 in-depth report “China's Heavy Equipment Works, Stable Dividend Premium Can Be Expected”). Investors' “required dividend rate” for a company can be composed of a risk-free interest rate and a requirement for risk compensation. Currently, the risk-free interest rate is still on a continuous downward channel (the yield to maturity of Chinese 10-year treasury bonds is 1.61%, -90.8 bp year on year), and future investors' “risk compensation requirements” are also expected to decline (market expectations for the stability of the company's dividend amount increase, market style bias is a stable asset with weak correlation with the economic cycle). We believe that investors' “required dividend rate” for the company still has room to decline.
Risk warning: Incoming water falls short of expectations, electricity prices fall short of expectations, investment returns fall short of expectations, etc.
