Incident: On August 21, 2024, the company released its 2024 semi-annual report. 24H1 achieved operating income of 39.377 billion yuan, a year-on-year increase of 0.26%, and achieved net profit of 7.109 billion yuan to mother, an increase of 2.16% over the previous year.

Basic earnings per share were 0.141 yuan, up 2.17% year on year, gross sales margin of 38.56%, down 4.15 pct year on year, net profit margin 27.55%, and a slight decrease of 0.23 pct year on year. In the 24Q2 single quarter, the company achieved operating income of 20.195 billion yuan, a year-on-year decrease of 3.77%, and realized net profit to mother of 3.505 billion yuan, an increase of 0.93% over the previous year.

Six nuclear power units were approved, and the scale under construction reached a new high. On August 19, 2024, 11 nuclear power units were approved at one time. Of these, the company was approved for 6 units, namely Shandong Zhaoyuan Unit 1 and 2, with a single unit capacity of 1.214 million kilowatts; Guangdong Lufeng Units 1 and 2, with a single unit capacity of 1.245 million kilowatts; and Cangnan Units 3 and 4, with a single unit capacity of 1.215 million kilowatts. Up to now, the company has managed a total of 16 nuclear power units that have been approved for FCD and are under construction, with a total installed capacity of 51.162 million kilowatts. As China's nuclear power plants enter an intensive approval period in recent years, the company's nuclear power reserve capacity is expected to increase further in the future.

The amount of feed-in electricity has remained stable, and the average feed-in tariff has declined. 24H1's installed capacity reached 31.756 million kilowatts, up 3.89% year on year, and completed a total of 10 unit replacement and overhaul. In the same period last year, the company completed the replacement and overhaul of 7 units. Despite the increase in Taiwan 1's grid-connection and anti-4 operation contribution, due to increased maintenance, the average utilization hours of the company's operating units was 3659 hours, a decrease of 2.35% year on year. The total feed-in power capacity of 24H1 nuclear power units was 106.01 billion kilowatt-hours, up 0.09% year on year. 82.013 billion kilowatt-hours, a year-on-year decrease of 0.19%; the feed-in electricity volume of joint enterprises was 23.997 billion kilowatt-hours, an increase of 1.03% year-on-year, and remained stable compared to the same period last year. In terms of feed-in tariffs, due to the decline in overall transaction prices in the electricity market, the average market electricity price of 24H1 companies fell 2.10% year on year, and the average feed-in price after tax was 0.3704 yuan/kilowatt-hour, down 1.60% year on year. Due to volume and price parity, 24H1's revenue growth was limited.

Issuance of convertible bonds to fund the commissioning of new units. The total investment plan for 2024 is 30.59 billion yuan, and the issuance of three ultra-short-term financing notes for 2024 was completed on April 3, June 11, and August 13, respectively. On June 21, the company plans to issue A-share convertible bonds to unspecified targets to raise no more than 4.9 billion yuan in capital for the construction of Guangdong Lufeng Nuclear Power Plant Unit 5 and 6 projects. On April 29, 2024, Lufeng Unit 5 entered the equipment installation stage. Lufeng 6 is still in the civil construction stage. It is expected that the two units will be put into operation in 2027 and 2028 respectively. In addition, Ningde Unit 5 entered the civil construction phase on July 28, 2024. Huizhou Unit 1 and Unit 2 will be put into operation in 2025 and 2026 respectively, while Cangnan Unit 1 and Unit 2 will be put into operation separately in 2026 and 2027. As the depreciation period and loan period of the old unit expires, the new unit will gradually be put into operation, and the company's performance is expected to further improve.

Investment suggestions: In the short term, the new operation of the company's Fangchenggang Unit 4 contributes to the increase in electricity volume; in the long run, nuclear power has high deterministic growth attributes. We forecast the company's profit. We expect net profit to be 11.835/12.12/12.482 billion yuan for 24/25/26, respectively, and EPS 0.23/0.24/0.25 yuan respectively. Corresponding to the closing price of PE on August 21, the PE is 21/20/20 times, respectively, maintaining a “careful recommendation” rating.

Risk warning: nuclear safety incidents; policy changes; blocking of new technologies; electricity price adjustments; exchange losses.