Incident: The company announced its 2024 interim results, and achieved net profit of 1.766 billion yuan in the first half of the year, a year-on-year decrease of 15.67%, better than the 19% decline we had previously anticipated in our performance outlook.

Poor wind conditions dragged down performance, installed capacity increased slightly, and wind power generation declined slightly. By the end of June 2024, the company's installed capacity was 15.55 GW, an increase of 1.23 GW over the previous year, an increase of 8.55%. However, due to poor wind conditions, the company achieved a power generation capacity of 17.13 billion kilowatt-hours in the first half of the year, the same as the same period last year. Among them, wind power generation was 15.25 billion kilowatt-hours, a year-on-year decrease of 4.32%, and photovoltaic power generation was 1.88 billion kilowatt-hours, an increase of 58.19% over the previous year. The company's revenue in the first half of the year fell by 5.02% year on year, mainly due to the decline in electricity prices. Considering that the price of new installed electricity was lower than the price of electricity in stock, the company's overall electricity price stability was in line with expectations.

Falling financial expenses and interim dividends are highlights of the report. The company's financial expenses for the first half of the year were 0.828 billion yuan, a decrease of about 0.05 billion yuan, or 5.65%, compared to 0.877 billion yuan in the same period in 2023. However, judging from the size of debt, the company's total debt reached 68.256 billion yuan at the end of June 2024, compared to only 61.785 billion yuan at the end of June 2023. The company's financing costs dropped significantly. According to the issuance of bonds announced by the company on August 22, the coupon interest rate for the company's latest 1 billion yuan bond is only 2.10%. Furthermore, the company announced an interim dividend of 0.03 yuan per share, which was the first interim dividend, exceeding expectations. It is expected that the company's management will continue to pay attention to shareholders' interests.

State-owned insurance capital increased the company's shares to 5% of the company's tradable share capital, and the company's value was deeply recognized. According to the latest equity disclosure data on the Stock Exchange, on August 15, 2024, Datang New Energy received an additional 5 million shares from Great Wall Life. After the increase in holdings, Great Wall Life Insurance's latest shareholding volume was 0.127 billion shares, which rose from 4.88% to 5.08% of the outstanding share capital. According to public information, Great Wall Life Insurance was founded in 2005, and the actual controller is the Beijing Xicheng District State-owned Assets Administration Commission. This increase in holdings reflects state-owned insurance capital's recognition of the company's long-term value. Under the new accounting standards and new insurance contract standards, the asset side has demand for low-impact dividend equity assets; at the same time, the Ministry of Finance has lengthened the ROE assessment cycle for state-owned insurance capital, prompting them to prefer low-level, valuable assets. Specifically, on the capital side, in April 2024, the new “National Nine Rules” clearly and vigorously promoted the entry of medium- to long-term capital into the market and continued to expand long-term investment strength. Objectively, changes in standards and a series of national policies have created an environment for insurance capital to participate in the stock market.

Datang Group's flagship new energy platform occupies a high-quality wind farm in Sanbei to welcome new and new generations. The company is the core new energy platform under the Datang Group. Datang Group promises that the company has priority options and purchasing rights for its domestic new energy business; the company's subsequent new energy development is expected to receive group support. On the other hand, the company initially focused on cultivating regions with excellent Sanbei Wind resources, and resource endowments are prominent in the current situation where high-quality wind farms are scarce. In March 2024, the State Council issued a notice on the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which once again mentions improving standards for wind turbines, photovoltaic equipment and product upgrades and decommissioning. According to the announcement, the company installed 4.028 million kilowatts of wind power in 2010 and before. Since the power of a single unit was generally less than 1.5MW before 2010, 4MW has become mainstream, the “big generation to small” transformation policy for old wind farm fans below 1.5 MW may free the company from the shackles of old stock units and improve operating efficiency.

Profit forecast and valuation: We maintain the company's net profit attributable to the parent company's owners in 2024-2026 at $2.938, $3.182, and $3.505 billion, respectively. Excluding interest on perpetual bonds of about 0.5 billion yuan, the current stock price is 5.9, 5.4, and 4.8 times PE for 2024-2026, respectively; the current PB is only 0.69 times, lower than Longyuan Electric (Hong Kong stock, 0.72x) and CGN New Energy (0.74x).

The company's current valuation level is still at an historically low level, maintaining a “buy” rating.

Risk warning: Policy implementation falls short of expectations, power abandonment exceeds expectations, and risk of impairment of accounts receivable.