China Galaxy Securities: Internal differentiation in 24Q3 fire, water, and nuclear, marginal improvement in green electricity.

China Galaxy Securities released a research report stating that the performance of the power industry in the 3rd quarter of 2024 saw a year-on-year increase, with a notable contribution from hydropower. In the first three quarters of 2024, the power industry achieved a net profit attributable to the parent company of 142.87 billion yuan, an increase of 12.9% year-on-year; of which, in the 3rd quarter of 2024, it achieved a net profit attributable to the parent company of 55.38 billion yuan, an increase of 1.9% year-on-year. Looking at the different sectors, the growth rate of thermal power industry's performance turned negative year-on-year in the 3rd quarter, while the growth rate of hydropower remained high, nuclear power continued to maintain a relatively stable performance, and green energy showed marginal improvement. In the long run, it is optimistic about the thermal power sector that has policy catalysis, continuous performance improvement, and valuation potential; and optimistic about the hydropower and nuclear power sectors with high performance certainty and strong dividend capabilities. New energy is already in the bottom area. The main points of China Galaxy Securities are as follows: Thermal Power: Regional differentiation, impairment drag on overall performance. In the 3rd quarter of 2024, the SW thermal power sector achieved operating income of 333.434 billion yuan, an increase of 0.8% year-on-year; achieving a net profit attributable to the parent company of 19.346 billion yuan, a decrease of 16.8% year-on-year. On the electricity side, in the 3rd quarter of 2024, the national thermal power generation increased year-on-year, but there was differentiation in different regions. The strong electricity demand in the eastern provinces and the dominance of thermal power in the power structure led to regional thermal power generation companies' growth rate outperforming national companies, becoming an important factor affecting the performance differentiation of companies in the 3rd quarter of 2024. On the electricity price side, the feed-in tariffs for thermal power companies decreased year-on-year in the 3rd quarter of 2024, but the decrease narrowed. In terms of costs, the coal price decreased by 2.1% year-on-year in the 3rd quarter of 2024, but considering the stock cycle of power plants, it slightly increased year-on-year. The decrease in electricity prices coupled with the increase in costs led to a year-on-year decrease in the profitability of the sector. In addition, the sector incurred an impairment loss of 1.815 billion yuan in the 3rd quarter of 2024, an increase of 45% year-on-year, dragging down performance. Hydropower: Overall impressive performance, but differences in different river basins. In the 3rd quarter of 2024, the SW hydropower sector achieved operating income of 62.359 billion yuan, an increase of 8.2% year-on-year; achieving a net profit attributable to the parent company of 25.969 billion yuan, an increase of 20.5% year-on-year. In terms of electricity, there was differentiation in water levels in different river basins in the 3rd quarter of 2024, with good water levels in the Jinsha River, Yalong River, Hongshui River, Yangtze River, and other river basins, but weak water levels in the Dadu River, Lancang River, and Qing River basins, leading to varying increases and decreases in electricity generation for major hydropower companies. In terms of electricity prices, the feed-in tariffs for most hydropower companies increased year-on-year in the 3rd quarter of 2024, with increases ranging from 1.93% to 4.65%. Looking ahead, the upstream reservoir group of the Yangtze River has basically completed its annual water storage task, which is expected to support the electricity generation performance in the 4th quarter of 2024 and the 1st quarter of 2025. Nuclear Power: Performance affected by unit commissioning and maintenance scheduling. In the 3rd quarter of 2024, the SW nuclear power sector achieved operating income of 42.438 billion yuan, an increase of 5.2% year-on-year; achieving a net profit attributable to the parent company of 5.926 billion yuan, a decrease of 1.7% year-on-year. The performance growth rates of the two nuclear power companies diverged in the 3rd quarter of 2024, mainly due to differences in unit commissioning and maintenance scheduling leading to varied year-on-year growth rates in electricity generation. CGN Power Co., Ltd.'s Fangchengang Unit 4 started commercial operation, and the Taishan Unit 1 resumed normal operation contributing incremental electricity generation in the 3rd quarter of 2024; China National Nuclear Power experienced a decrease in electricity generation year-on-year due to an increase in maintenance days, typhoons in Hainan, and a minor overhaul of Unit 4 in Fuqing. Looking ahead, the commissioning of Zhangzhou Unit 1 and Huizhou Unit 1 is imminent, which are expected to contribute to performance growth for both companies in 2025. Green Energy: Marginal performance improvement, significant improvement in cash flow. In the 3rd quarter of 2024, the green energy sector achieved operating income of 20.23 billion yuan, a decrease of 0.6% year-on-year; achieving a net profit attributable to the parent company of 4.14 billion yuan, an increase of 18.5% year-on-year. In the first three quarters of 2024, the sector achieved an operating net cash flow of 30.25 billion yuan, an increase of 29% year-on-year, showing a significant improvement. In the 3rd quarter of 2024, improved wind resources combined with a high increase in installed capacity drove year-on-year growth in electricity generation for companies, but the feed-in tariffs continued to be under pressure, resulting in a year-on-year decline in sector revenue. However, considering the greater decrease in costs, the growth rate of net profit attributable to the parent company significantly outperformed the revenue growth rate. In addition, the sale of assets by China Longyuan Power Group Corporation and CHINA GREEN in the 3rd quarter of 2024 also made a significant contribution to the sector's performance. Concerning the targets, attention was drawn to Huaneng Power International, Inc. (600011.SH), An Hui Wenergy (000543.SZ), Sichuan Chuantou Energy (600674.SH), China Yangtze Power (600900.SH), CGN Power Co., Ltd. (003816.SZ), and others. Risk warning: Risks of resource conditions falling short of expectations; risks of electricity demand falling short of expectations; risks of feed-in tariffs falling more than expected; risks of coal prices rising more than expected, etc.