1H21's performance is in line with our expectations.
Huadian International announced 1H21 results: operating income of 53.48 billion yuan, year-on-year + 28.8%; net profit of 3.32 billion yuan, + 39.0% year-on-year; net profit of 1.09 billion yuan, 48.6% of the same period last year, after deducting non-recurrent profits and losses such as one-time investment income and impairment losses of asset restructuring, which is in line with our expectations.
The "simultaneous rise in volume and price" of thermal power is difficult to offset the rise in fuel costs. In the first half of the year, the utilization hours of coal-fired and gas-fired units in the company were + 22.79% and 15.9% respectively compared with the same period last year; the average on-grid electricity price and transaction electricity price were + 3.0% 3.5% compared with the same period last year, but the unit combustion cost was + 31.4% year-on-year. Drag down operating profit year-on-year-43.3% asset structure adjustment brought one-time investment income and impairment losses, resulting in positive profit contribution. In the first half of the year, the company recognized profits of 882 million yuan and 2.952 billion yuan respectively from the sale of Ningxia assets and participation in the integration of new energy assets. In addition, the company plans to sell Shanxi Maohua Coal Mine as a whole, with an impairment provision of about 2.106 billion yuan. Taken together, the asset structure adjustment contributed a profit of about 1.7 billion yuan.
We will continue to optimize the scale and structure of financing, and financial costs will be further reduced. The financial expenses of company 1Q and 2Q decreased by 18% 6% and 9% respectively compared with the same period last year, with reduced interest-bearing liabilities and lower financing costs. The capital cost ratio in the first half of the year decreased 0.33ppto compared with the same period last year. By the end of June 2021, the company's asset-liability ratio was 57.9%, which was lower than that at the end of 2020 and remained healthy and stable.
Development trend
Huadian International positioning of traditional energy development platform, investment in China Dianfu New enjoy the dividend of new energy growth. In May this year, the company transferred its new energy assets to Huadian Fuxin, and the company held a 37.2% stake in Fuxin Development after the capital increase and the completion of asset and equity delivery.
1) after the reorganization, the company will become the group's traditional energy integration platform (coal, gas, hydropower). At present, the company's installed capacity is 53.4GW, including coal turbine 42.4GW, gas turbine 8.3GW, hydropower and other renewable energy 2.7GW, which is under construction 2.4GW, in which 754MW is scheduled to be put into production in the second half of the year. "14th five-year Plan"
During this period, the company is also expected to acquire the group's high-quality unlisted traditional energy assets and participate in hydropower and nuclear power projects.
2) develop new energy business indirectly through Fuxin development. The company's new energy rights and interests rose instead of falling, increasing its 2.57GW to 8.82GW, an increase of 41 per cent compared with before the restructuring. The company may benefit from professional operation and enjoy the rapid growth of new energy. The group aims to add new energy-70GW in five years.
Profit forecast and valuation
Due to the higher-than-expected increase in fuel costs, we cut our net profit by 12.0% in 2021 / 2022 to 4.637 billion yuan / 5.021 billion yuan. The current A-share and H-share prices correspond to the price-to-earnings ratio of 8.2 times / 7.6 times and 4.2 times / 3.8 times in 2021 / 2022, respectively. In view of the company's commitment to a dividend of not less than 0.2 yuan a year by 2022, we will maintain the A-share and H-share outperform industry ratings. However, taking into account the decline in profits as a result of the rise in thermal power fuel costs, we lowered the target price of A shares by 10.0% to 4.13 yuan and H shares by 10.0% to HK $2.89, corresponding to 8.8 times / 8.1 times and 4.6 times 14.2 times earnings in 2021 / 2022, respectively. there is 6.7% and 9.5% upward space compared with the current stock price, respectively.
Risk
Electricity consumption is not growing as fast as expected; coal prices remain high.