CHUANTOU ENERGY(600674)：RAPID GROWTH MEETS EXPECTATIONS WITH YALONG HYDRO UNLOCKING POTENTIAL

　　In 1-3Q23, the Company's attributable net profit （ANP） increased by 31.6% YoY to Rmb3.842bn, mainly benefiting from the growth in investment income contributed by Yalong Hydro. By comparing the earnings growth in 1-3Q23 with that in 8M23, we can infer that the power generation of Yalong Hydro in Sep has improved significantly due to better water runoff.
　　The new power stations in the middle reaches of the Yalong River were unable to operate fully and effectively during the 2023 flood season due to weak water runoff. As the water runoff gradually recovers, we expect that the power generation and earnings elasticity of Yalong Hydro will be unleashed, thereby bolstering the Company's growth in investment income and ANP. We forecast the 2023E/24E/25E ANP to be Rmb4.64bn/5.47bn/5.75bn, maintain the target price at Rmb17.20 and reiterate the “BUY” rating.
　　 1-3Q23 ANP of Rmb3.842bn came in line with expectations.
　　In 1-3Q23, the Company achieved unaudited revenue of Rmb1.02bn （+15.5% YoY）， ANP of Rmb3.842bn （+31.6% YoY）， corresponding to EPS of Rmb0.86 （+30.0% YoY）， in line with expectations. In 3Q23 alone, the Company achieved revenue of Rmb473mn （+16.1% YoY）， ANP of Rmb1.744bn （+28.3% YoY）， corresponding to EPS of Rmb0.39 （+26% YoY）。
Earnings grew rapidly due to an increase in investment income from core hydro assets.
　　In 1-3Q23, the Company's ANP increased by 31.6% YoY, mainly benefiting from the increase in investment income contributed by the core equity asset Yalong Hydro, in which the Company holds a 48% stake. In addition, the additional 10% equity interest in Dadu River Hydropower Development also contributed to the earnings increase. Driven by factors including the gradual release of the power generation capacity of the new power stations in the middle reaches of Yalong River and the carryover effect of rising tariffs of electricity sold by Jinping-Guandi Power plants to Jiangsu Province, Yalong Hydro's earnings grew significantly in 1-3Q23. During the flood season, the water runoff in Yalong River remained relatively low. The water inflow in Jul/Aug dropped by 46.1%/1.4% YoY, respectively. Considering that the Company's earnings growth in 1-3Q23 has accelerated compared with the 19.3% recorded in 8M23, we reckon that the power generation of Yalong Hydro may have increased significantly YoY in Sep. In 1-3Q23, the overall water supply in the southwest region was still relatively depleted, and the new power stations put into full operation in 1Q22 have not been operating at their optimum capacity. We expect that the power generation capacity will continue to be released as the water runoff recovers, further contributing to the Company's investment income.
The Company’s holding assets have shown outstanding performance and electricity revenue is growing steadily.
　　In 1-3Q23, the Company's controlled power generation increased by 16.3% YoY. Specifically, hydropower generation increased by 12.0% YoY to 3.81TWh due to the removal of the impact of the Renzonghai Dam regulation,　　while solar power generation increased by 556% to 120GWh due to the carryover effect of the acquisition of Guiping Photovoltaic Power Station in 3Q22. Thanks to the combined growth of hydropower and solar power generation, the Company's revenue in 1-3Q23 increased by 15.5% YoY.
Potential risks: Disappointing water runoff and power generation; disappointing tariffs of new plants of Yalong Hydro; power trading tariffs not up to expectations; macroeconomic weakness weighing on electricity consumption.
Investment recommendation: After adjusting the operating and financial data assumptions for Yalong Hydro, we accordingly tweak our 2023E/24E/25E ANP forecast to Rmb4.64bn/ 5.47bn/5.75bn （vs previous forecast of Rmb4.53bn/5.30bn/5.57bn）， corresponding to EPS forecast of Rmb1.04/1.23/1.29 and 14x/12x/12x 2023E/24E/25E PE. Based on the Company's historical average PE over the past three years plus one standard deviation, we assign 17x 2023E PE to derive a target price of Rmb17.20 and reiterate the “BUY” rating.
【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。

   【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。