Introduction to this report:

All of the company's Golden Bell Phase I wind power plants have been put into operation, and the electricity volume has maintained rapid growth, and high annual performance can be expected.

Key points of investment:

Maintain the “Overweight” rating: Maintain the 2024/2025/2026 EPS to 1.09/1.26/1.58 yuan.

Maintain the target price of 16.32 yuan and maintain the “Overweight” rating.

Incident: The company issued the “Notice Concerning All 0.3 Million Kilowatt Fans of the Jinzhong Wind Farm Phase I Project, a Wholly-owned Subsidiary of Huizeyun Energy Investment Development Co., Ltd.” The 0.3 million kW fans under construction of the Jinzhong Wind Farm Phase I project were all connected to the grid at the end of 1H24.

All Admiralty Phase I wind power plants have been put into operation, and electricity capacity has maintained rapid growth. By the end of 1H24, the company had put into production 1.88 million kilowatts of new energy, +133% year-on-year, of which 1.77 million kilowatts of wind power (+139% YoY) and 0.11 million kilowatts of photovoltaics (+60.6% YoY).

From April to May 2024, the company's power generation capacity was 0.81 billion kilowatt-hours, +102% year-on-year, and power generation continued to grow rapidly. According to the company's disclosure: 1) The second phase of the Jinzhong wind farm project and the Huludi PV project are scheduled to be put into operation at full capacity within 2024; 2) the company strives to start construction of the 0.67 million kilowatt wind power expansion project and connect the first batch of units to the grid in 2024; 3) As of May 22, 2024, the company has signed multiple “substitute cultivation agreements” with the controlling shareholders and their subsidiaries with a total rated capacity of 1.05 million kilowatts, which will be injected into the company on a priority basis after the projects meet good profit and standardized operating conditions. We expect that with the support of the company's sufficient project reserves, new energy installed capacity is expected to maintain steady growth.

The profitability of the new projects is better, and the high increase in performance continues to be interpreted. Yunnan Province is rich in wind energy resources. From 2019 to 2023, the average number of hours used for wind power in Yunnan Province was 2,602 hours, 435 hours higher than the national average for the same period. According to the company's disclosure, the company's wind farms such as Yongning are all located in development areas with good wind energy resources in Yunnan Province, and there is basically no electricity abandonment during the dry season in Yunnan Province. The company's net profit for 1Q24 was 0.36 billion yuan, +94.8% year-on-year, mainly driven by the new energy business (net profit of the company's new energy sector was 0.32 billion yuan). We believe that the company's high performance in 1Q24 confirms that the profitability of the company's new wind power projects remains at a high level (we believe that the estimated yield of the company's new wind power project is conservative; in fact, key parameters such as grid electricity prices, utilization hours, and construction costs are expected to be superior to the estimated project estimates. For details, see our in-depth report “Seeing the Company's Profit Potential from the Yongning Project” released in January 2024). It is expected that the company's 2024E annual high performance growth can be expected.

Risk warning: Electricity demand falls short of expectations, salt and nitrogen business operations fall short of expectations, asset acquisition progress and plans fall short of expectations, etc.