SCTE(SH:600674)2024-02-27 16:00Investment Rating - The report maintains a "Recommended" rating for the company [2]. Core Insights - The company focuses on hydropower as its core business, with continuous growth in installed capacity driven by self-built and acquired projects. The company has a unique resource advantage in the Yalong River, Dadu River, and other basins, with an equity installed capacity of 14.82GW as of the first half of 2023, reflecting a compound annual growth rate of 18% from 2021 to mid-2023 [6][8]. - The Yalong River hydropower capacity has a growth potential exceeding 50%, with long-term plans for 40GW of new energy. The Yalong River hydropower company, in which the company holds a 48% stake, has exclusive development rights for the third-largest hydropower base in the country [6][40]. - The Dadu River's installed capacity is expected to increase, with a clear growth trajectory. The company holds a 20% stake in the Dadu River company, which has approximately 11GW of hydropower in operation and an additional 3.52GW expected to be operational by around 2025 [6][10]. - The company's asset-liability ratio is below 40%, significantly lower than industry leaders, indicating a strong financial position. The company plans to distribute cash dividends of no less than 4 yuan per 10 shares, with total dividends expected to exceed 19.5 billion yuan annually [6][27][25]. Summary by Sections Section 1: Hydropower as Core Business - The company has a diversified industrial layout with hydropower as the main focus, supported by investments in high-tech fields such as rail transit automation and fiber optic products [6]. - The company has a total installed capacity of 35.41GW, with a year-on-year growth of 0.8% [8]. Section 2: Steady Growth and Increasing Dividends - The company's revenue and net profit have shown steady growth, with a compound annual growth rate of 11.5% in revenue from 2018 to 2023. In 2023, the company achieved a revenue of 14.86 billion yuan, a year-on-year increase of 4.61% [13][23]. - The average on-grid electricity price for Yalong River hydropower increased by 8.7% year-on-year to 0.313 yuan, which helps offset the impact of lower water inflow [13][18]. Section 3: Strong Cash Flow and Low Debt Ratio - The company has stable operating cash flow, with a net cash flow from operating activities of approximately 4.23 billion yuan in the first three quarters of 2023, reflecting a year-on-year growth of 7.1% [27]. - The company's asset-liability ratio has increased but remains below 40%, indicating a lower risk profile compared to industry peers [27][28]. Section 4: Clear Growth in Dadu River Capacity - The Dadu River's hydropower capacity is expected to see significant increases, with the company benefiting from reduced water wastage and rising market electricity prices [6][10]. - The company has a clear growth path with the Dadu River company, which is expected to contribute significantly to future profits [6][10]. Section 5: Profit Forecast and Valuation Analysis - The company is projected to achieve net profits of 44.04 billion yuan, 49.13 billion yuan, and 55.21 billion yuan from 2023 to 2025, with corresponding price-to-earnings ratios of 15.9x, 14.2x, and 12.7x, all below the industry average [6][4].