China Merchants Securities: Guoneng Daduhe's potential performance elasticity exceeds 16% installed capacity growth+joint scheduling brings high growth

The Zhitong Finance App learned that China Merchants Securities released a research report saying that thanks to the convenient operation of UHV in Sichuan and Chongqing, Guoneng Daduhe's potential performance elasticity exceeds 16%. If the market-based ratio increases, the effect of increasing performance will be even more obvious. It is recommended to focus on Guodian Electric Power. On the one hand, the amount of high-priced electricity transmission is expected to increase after UHV production is put into operation, which will increase the company's profits; on the other hand, after hydropower plants such as Shuangjiangkou are put into operation, it will lead to an increase in electricity generation, and cascade adjustment is expected to bring increased efficiency and further enhance the company's performance.

The main views of China Merchants Securities are as follows:

The operation of UHV in Sichuan and Chongqing facilitates electricity delivery, and the potential performance flexibility of Guoneng Dadu River exceeds 16%.

The Dadu River has excellent development conditions and is equipped with scarce hydropower resources. The upstream, midstream, and downstream are each planned for 10/8/10 cascade power plants. Currently, 17.42 million kilowatts of installed capacity have been put into operation. Guodian Electric Power's hydropower units are mainly concentrated in the subsidiary Guoneng Dadu River. For a long time, due to poor delivery channels, the water waste problem in the Dadu River Basin was serious, and the company's hydropower performance growth was limited. The Sichuan-Chongqing UHV AC Project is one of the key tasks of the “14th Five-Year Plan” power plan in Sichuan Province. After completion, the transmission capacity will exceed 35 billion kilowatt-hours, and it is expected to be put into operation before the peak in the summer of 2025.

After the Sichuan and Chongqing UHV is put into operation, some hydropower from Guoneng's Dadu River is expected to be delivered to Chongqing. It is estimated that electricity prices will increase by 0.045 yuan/kilowatt-hour after the electricity is delivered. According to estimates, if 15% of Guoneng Dadu River's hydropower is sent to Chongqing for consumption, the 2026 and 2027 performance increase will exceed 300 million yuan, corresponding to Guodian Electric Power's hydropower sector's performance elasticity of more than 16% in 2023, and the corresponding overall performance flexibility of more than 5%.

Installed capacity is growth+joint commissioning, and hydropower performance is expected to increase by 40%/67% in 26/27.

1) Installed capacity growth: Guoneng's Dadu River has sufficient installed potential in the short to medium term. The 4 hydropower plants under construction at Shuangjiangkou, Jinchuan, Chuantouba Level 2, and Shaping are expected to be put into operation in 2026 and 2027. After operation, they will boost the company's hydroelectric power generation capacity, and the increase in feed-in power may drive performance growth. According to estimates, the total profit from the commissioning of hydropower plants is expected to increase by 510/728 million yuan respectively in 2026/2027. After considering the shareholding ratio, Guodian Electric Power's performance is expected to increase by 2.91/385 million yuan, respectively.

2) Joint modulation and additional generation: The Shuangjiangkou Hydropower Station has annual adjustment capacity. It uses ironing to smooth out incoming water fluctuations. The additional generation effect significantly increases the profits of the parent company. According to estimates, the 2026/2027 Shuangjiangkou Hydropower Station will bring net profit of 898/1,699 million yuan respectively, and Guodian Electric Power's performance is expected to increase by 452/854 million yuan respectively. Comprehensive installed capacity growth+increased efficiency from joint scheduling is expected to bring the company an increase of 743/1,239 million yuan in 2026/2027. The elasticity corresponding to Guodian Electric Power's hydropower sector performance in 2023 is 40%/67%, and the corresponding overall performance flexibility is 13%/22%.

At the same time, against the backdrop of rapid growth in electricity consumption in the Sichuan and Chongqing regions and the continued increase in the proportion of local market-based transactions, market-based electricity prices for hydropower in Sichuan are expected to rise. It is estimated that when the market-based transaction ratio is 65%, if local market-based electricity prices in Sichuan increase by 1 cent, it will increase Guoneng Dadu River's performance by 150 million yuan. Corresponding to Guodian Electric Power's performance elasticity in the hydropower sector in 2023 is 8%, and the corresponding overall performance elasticity is 3%. If the ratio of marketization increases, the effect of increasing performance will be even more obvious.

Investment advice: Focus on recommending Guodian Electric Power (600795.SH).

1) In the short term: Incoming water improved significantly in the second and third quarters of 2024, and the company's hydropower performance is expected to benefit from growth; the coal price center is declining, the price policy for thermal power capacity is implemented, and there is also a lot of room for flexibility in performance;

2) In the medium to long term: Dadu River Hydropower is highly flexible in construction, and with the opening of UHV lines and the commissioning of the Shuangjiangkou Power Station, the company's hydropower water disposal dilemma is expected to be resolved, and reverse flexibility is greatest. The company had the highest installed energy capacity during the “14th Five-Year Plan” period, and will fully benefit from energy transformation and complementary multi-energy collaborative development.

It is recommended to pay attention to other high-quality hydropower standards such as Sichuan Investment Energy (600674.SH), SDIC Electric Power (600886.SH), and Changjiang Electric Power (600900.SH).

Risk warning: incoming water falls short of expectations, rising water and electricity prices fall short of expectations, project construction progress falls short of expectations, weak demand for terminal electricity due to declining economic growth, and power market-based reforms fall short of expectations.