Water inflow rebound facilitated a rise in 1H24 earnings
GEPIC Energy Development’s (GEPIC ED) 1H24 revenue/attributable NP were RMB1,235/287mn (up 14.1/18.1% yoy), with the latter at the upper range of its profit alert (RMB275-295mn). For 2Q24, revenue/attributable NP changed by +0.5/-17.6% yoy to RMB730/235mn, with the yoy drop in the latter mainly owing to: 1) a yoy decline of 11% in on-grid hydropower tariffs; and 2) a yoy drop of 16% in wind power utilization hours due to tepid wind resources. We maintain our 2024/2025/2026 attributable NP forecasts at RMB686/712/767mn, with EPS of RMB0.43/0.44/0.48. We expecting GEPIC ED to elevate its on-grid wind power tariffs against macro headwinds and value the stock at 16x 2024E PE, above its peers’ average of 14.8x on Wind consensus. Our target price is RMB6.85 (previous: RMB6.97). Maintain BUY.
1H24 hydropower NP +51% yoy, 2Q24 wind power utilization hrs -16% yoy
Due to a rebound in water inflow, 1H24/2Q24 on-grid hydropower output grew 11/10% yoy to 2.41/1.67bn kWh. GEPIC ED’s 1H24 hydropower NP jumped 51% yoy to RMB168mn. As the majority of its hydropower tariffs is approval-based, the 2Q24 on-grid hydropower tariffs dipped 11% yoy to RMB0.251/kWh (tax included), mainly due to rising contribution from low-tariff on-grid hydropower output. Its 2Q24 on-grid wind power generation fell 7% yoy to 0.53bn kWh, chiefly owing to a yoy drop of 16% in utilization hours, but on-grid wind power tariffs picked up 5% yoy to RMB0.572/kWh. Due to increased PV installations, its on-grid PV power output jumped 116% yoy in 2Q24 despite a yoy decline of 16% in PV utilization hours that quarter. For 1H24, its new energy NP fell 1% yoy to RMB220mn.
Premium coal-fired power assets to boost profit and valuation
The injection of Changle has kicked off. Changle’s NP was RMB0.07/kWh for 2023, matching that of integrated coal-power companies. For 2024-2026, Changle Phase I’s utilization hours are contractually guaranteed to be no less than 5,000 hours. As Hunan is on the low voltage side of the system, the margin for coal-fired tariff is underpinned by high coal prices. Phase II, scheduled for consumption within the home province and peak-shaving in nearby provinces, is expected by the company to be commissioned at end-2025. We estimate Changle’s NP to be RMB0.06/0.06/0.05 per kWh for 2024/2025/2026, with ROE of 19/20/20%, which should in our view lift attributable NP of the company by 109/109/103% upon injection. Based on its commitment to intra-industry competition, we expect asset injection of the Wuwei/Zhangye plants (2023 NP: RMB39/112mn) by end-2025.
Risks: water inflows, asset injection, and UHV construction missing our expectations; coal prices higher than we expect.

GEPIC Energy Development (GEPIC ED), GEPIC’s sole listed platform, controlled 1.7GW of hydropower and 1.84GW of new energy (NE) at end-2023. Its net profit (NP) from NE was RMB0.15/kWh for 2023, and we expect profit declines to be controllable in the short term. Indeed, we estimate narrower depreciation costs in existing hydropower equipment to lift its NP by RMB0.018/kWh for 2031 vs 2023. GEPIC ED is to purchase Changle from GEPIC solely through equity issuance; Changle’s NP was RMB0.07/kWh for 2023, rivaling that of integrated coal-power companies, and we estimate its EPS rising 15/15/12% for 2024/2025/2026, supporting a re-rating for GEPIC ED. We estimate GEPIC ED’s 2024/2025/2026 attributable NP at RMB686/712/767mn, with EPS of RMB0.43/0.44/0.48, and value the stock at 16.3x 2024E PE. Our target price is RMB6.97. Initiate at BUY.

　　事件：
　　公司发布2023年年报，2023年实现营收26.41亿元，同比+29.05%；归母净利润5.21亿，同比+72.62%。其中，2023Q4单季营收7.29亿元，同比+49.66%；归母净利润-0.38亿元，去年同期为-0.64亿元。
　　观点：
　　量价齐升推动公司2023年营收净利增长。2023年，公司在建风电光伏项目陆续投产发电，新增装机65万千瓦；同时受洮河流域、白龙江流域来水量增加的影响，所属电站全年完成发电量86.33亿千瓦时，上年同期发电量72.96亿千瓦时，同比增加13.37亿千瓦时。公司2023年平均上网电价为346.85元/兆瓦时，上年同期平均上网电价为315.11元/兆瓦时，同比增加10.07%。
　　拟与华润共同开发6GW大基地项目，新能源装机规模有望持续提升。截至2023年末，公司控股装机容量为353.97万千瓦，其中，水电/风电/光伏控股装机容量分别为170.02万千瓦/110.35万千瓦/73.6万千瓦。2024年3月，公司宣布拟与华润电力新能源投资有限公司成立合资公司，共同开发建设腾格里沙漠600万千瓦新能源项目，其中甘肃能源持股51%。此外公司还储备了武威民勤100万千瓦风电及光伏项目等建设指标，新项目的开发推进将进一步提升公司装机规模，巩固业务优势。
　　积极推进收购甘肃电投常乐发电66%股权事宜，向调峰火电业务领域扩展。2024年3月，公司发布收购电投集团常乐公司66.00%股权的预案，标的资产价格、股份与现金对价支付比例尚未确定。
　　常乐公司2022年实现净利润6.74亿元，是西北地区最大调峰火电项目，同时也是国家“西电东送”战略重点工程祁韶±800千伏特高压直流输电工程的配套调峰电源，一期4*100万千瓦超超临界燃煤机组已全部建成投产发电，二期2*100万千瓦项目已于2023年4月开工扩建，总装机将达到600万千瓦。本次交易有利于上市公司向新能源发电相关的调峰火电业务领域扩展，优化电源结构，增强电力业务核心竞争力。
　　盈利预测和投资评级：公司新能源储备项目充足，有望持续贡献成长性，火电资产的注入也将丰富电源结构，增强业务竞争力。
　　暂不考虑常乐发电注入，预计公司2024-2026年归母净利润分别为6.09/6.69/7.48亿元，对应2024-2026年PE分别为15.23/13.85/12.38倍。维持“增持”评级。
　　风险提示：政策推进不及预期；新增装机不及预期；资产注入进度不及预期；电价下调；行业竞争加剧；三方数据统计风险等。