JILIN ELECTRIC POWER(000875)：1H22 RESULTS SLIGHTLY BEAT OUR EXPECTATIONS;NEW ENERGY INSTALLATIONS UP 1.76GW

　　1H22 results slightly beat our expectations
Jilin Electric Power announced 1H22 results: Revenue grew 20.86% YoY to Rmb7.7bn, and attributable net profit rose 0.91% YoY to Rmb754mn. In 2Q22, revenue grew 19.2% YoY to Rmb3.41bn, and attributable net profit rose 5.4% YoY to Rmb339mn. 2Q22 earnings slightly beat our expectations and outperformed other thermal power companies.
　　Installed new energy capacity steadily increasing; profit contribution expanding. As of June 30, 2022, the firm had installed 8.91mn kW of new energy capacity, accounting for 72.96% of its total installation (+7.66ppt YoY). The firm installed 1.76mn kW of wind and solar power capacity in 1H22, beating our expectations. New energy's contribution to profit also grew with installations. The photovoltaic (PV) business contributed Rmb1.02bn of gross profit (+70% YoY), with GM up 5.3ppt YoY to 54.17%. Wind power contributed Rmb828mn of gross profit, largely flat YoY, as less suitable weather conditions in China offset the contribution of newly installed capacity. GM of the wind power business fell 5.28ppt YoY to 55.55%.
　　Thermal power contributes notably to revenue; rising fuel costs result in GM declines YoY. In 1H22, thermal power revenue grew 7.39% YoY to Rmb2.37bn to account for 30.8% of total operating revenue. The selling price of electricity was sound, but the power generation volume was reduced. According to Jilin province's January-June power generation data, thermal power utilization hours fell 9.5% YoY in 1H22, with 2Q22 down 17% YoY. The firm did not release per-unit fuel costs, but they remain high, in our view. The company’s peers have seen their average unit fuel costs increase by 40-50% YoY in 2022. GM of the thermal power business fell 4.55% YoY to 19.63%.
　　Cash and cash flow improved with renewable energy subsidies. The firm had Rmb2.47bn in cash at end-1H22, up from Rmb932mn in early 2022. Cash flow from operating activities grew to Rmb4.61bn YoY (vs. Rmb1.67bn 2Q21) supported by subsidies for renewable energy and greater revenue from thermal power.
　　Trends to watch
　　Adds to presence in agriculture-PV projects, pumped storage, and hydrogen. The firm is increasing the proportion of clean energy it produces. The wholly-owned subsidiary Guangxi Wozhong plans to invest in the 300MW Baiji Xinping agriculture-PV (agrivoltaics) power generation project in the Yongning district in the city of Nanning, Guangxi Zhuang Autonomous Region. In May, the firm signed a contract with the government of Wangqing county in Jilin province to develop and build a 5,000MW pumped storage project in the Qian River watershed. In January the firm invested in a hydrogen energy fund to help expand its presence in hydrogen, new industries and to accelerate the transition to new energy.
　　Financials and valuation
　　We raise our revenue forecast by 14% YoY to Rmb15.79bn for 2022, and by 29% YoY to Rmb17.88bn for 2023, to reflect sharp rises in electricity prices. Our earnings forecasts are unchanged, as fuel costs weigh on the thermal power business. The stock is trading at 21.5x 2022e and 21.5x 2023e P/E. We maintain OUTPERFORM and a TP of Rmb9.24. Our TP implies 27x 2022e and 27x 2023e P/E, offering 26% upside.
　　Risks
　　Installed capacity of renewable energy-based power projects disappoints; coal prices remain high.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。