Jingke Technology released its three-quarter report: 3Q24 achieved revenue of 1.967 billion yuan (yoy +12%, qoq +72%), net profit of 0.132 billion yuan (yoy -48%, qoq -29%), deducting non-net profit of 0.199 billion yuan (yoy -20%, qoq +13%). 1-3Q24 achieved revenue of 3.89 billion yuan (yoy +11%), net profit of 0.22 billion yuan (yoy -44%), deducting non-net profit of 0.286 billion yuan (yoy -19%). The company's non-net profit deduction for the third quarter was in line with our expectations for mid-September (1.87 to 0.207 billion yuan). The amount of electricity generated in the first three quarters exceeded that of last year. Some households completed the transfer of photovoltaics, and the repayment of green power subsidies was beneficial to cash flow. Maintain an “Overweight” rating.

Power generation in the first three quarters surpassed that of last year. Some household photovoltaics completed the transfer of 9M24/3Q24, achieving gross profit of 1.559/0.652 billion yuan (yoy +7.5%/+11.2%), gross profit margin of 40%/33% (basically the same as the previous year); investment income 0.018/-0.002 billion yuan (yoy -89%/-104%), mainly because the scale of power plant transfers was lower than the same period last year. The company completed some household PV transfers in 3Q24. Inventory at the end of September decreased by 9% to 4.52 billion yuan compared to the end of June, but inventory accounted for a ratio of yoy+8.5pp to 28.6% of net assets. With the implementation of the company's power plant transfer plan, we expect the company's return on investment to grow in 24-26. The year-on-year increase in installed capacity led to an increase in the company's power generation capacity. The company's 9M24/3q24 power generation YoY +38%/30% to 5.238/1.955 billion kilowatt-hours; considering changes in installed capacity forecasts for self-owned power plants, we expect +31%/+23%/+14% of power generation in 24-26.

Green power subsidy reimbursement was beneficial to cash flow. As part of the green power subsidy reimbursement due to the typhoon disaster, the company's accounts receivable at the end of September were basically the same as at the end of June, and the proportion of net assets remained flat at 39% month-on-month. 9M24's operating cash flow changed from negative to 0.59 billion yuan, of which 3Q24 yoy +103% to 1.32 billion yuan. The company is expected to significantly benefit from the accelerated repayment of green power subsidies, improving the quality of cash flow and reducing the risk of impairment. We expect operating cash flow to increase year-on-year in '24.

The company's Xuwen Yuguang Complementary Project was damaged due to typhoon “Mao”. The company calculated fixed asset scrapping losses of 0.064 billion yuan in 3Q24 and included non-operating expenses, which is the main difference between returning to mother and deducting non-net profit.

Potential debt conversion and resale pressure. The current balance of capital reserves and solvency Jingke Bonds is 2.296 billion yuan. The trigger price for the resale is 3.67 yuan, which is 18% higher than the current stock price. The start date of the resale is 2025/4/23. As of the end of September, the company had about 4.786 billion yuan in cash. Considering operating cash flow and household PV transfers, the company's capital reserves may be able to cope with potential debt conversion and resale pressure.

The profit forecast was slightly lowered. Based on the 25-year target valuation increase and target price reduction in transfer project capacity and investment income, we forecast that the company's net profit for 24-26 will be 0.569/0.786/0.944 billion yuan (previous value 0.607/0.815/1.002 billion yuan), with a year-on-year growth rate of 48/38/ 20%, and EPS of 0.16/0.22/0.26 yuan. Wind agreed that the average PE value of the company in 25 years was 18x, giving the company 18 x PE in 25 years, with a target price of 3.96 yuan (previous value of 3.4 yuan, based on 20 x PE in 24 years).

Risk warning: Competition for PV project development intensifies; PV module prices fall short of expectations; risk of abandonment of light and electricity limits; impairment losses exceed expectations; household PV transfers fall short of expectations.