Event

Huaneng International releases Triple report 2021

Huaneng International released its three-quarter 2021 report that in the first three quarters of 2021, the company achieved operating income of 145.005 billion yuan, an increase of 19.00% over the same period last year, and a net profit of 783 million yuan, down 91.42% from the same period last year. The weighted ROE was-1.14%, down 11.38% from the same period last year. In the third quarter, the company realized operating income of 49.89 billion yuan per quarter, an increase of 16.82% over the same period last year; net profit of-3.499 billion yuan, down 203.05% from the same period last year; and basic earnings per share of-0.26 yuan, with a weighted ROE of-5.69%.

Brief comment

Electricity sales in the first three quarters increased by 17.11 percent, and the proportion of electricity sold by market-oriented transactions increased in the first three quarters of 2021. In the first three quarters of 2021, the company's operating power plants completed electricity sales of 323.115 billion kilowatt hours, an increase of 17.11 percent over the same period last year, and 115.188 billion kilowatt hours in the third quarter, an increase of 10.98 percent. The reason for the increase in electricity sales of the company is that, first, the electricity consumption of the whole society remained high in the first three quarters, which led to a sharp increase in electricity consumption on the power generation side compared with the same period last year. Among them, the power generation capacity of the power plants in Chongqing, Guangdong, Zhejiang, Shanghai, Fujian, Hunan and Jiangsu increased significantly compared with the same period last year; second, during the period of meeting the peak and spending the summer, the thermal power load maintained rapid growth, and the number of hours used by the company's thermal power units increased more. In the first three quarters of 2021, the company's average online settlement electricity price was 0.4178 yuan per kilowatt-hour, up 1.28% from the same period last year; the proportion of company settlement market-oriented transactions was 59.99%, an increase of 3.05% over the same period last year. The average electricity price of the company in the third quarter was 0.4331 yuan / kWh, an increase of about 2.17fen / kWh over the same period last year, mainly due to the increase in the proportion of new energy generation of the company.

The single-quarter results in the third quarter are under short-term pressure, and the company is optimistic about the long-term development of thermal power leaders. In the third quarter, the company put into production 860000 kilowatts of new units, of which wind power and photovoltaic installed capacity are 580000 kilowatts and 280000 kilowatts respectively. As of September 30, 2021, the company's installed wind power capacity is 9.18 million kilowatts, solar power installed capacity is 2.98 million kilowatts, and the installed capacity of new energy continues to increase. In the third quarter, the company achieved operating income of 49.89 billion yuan, an increase of 16.82% over the same period last year; the net profit was-3.499 billion yuan, down 203.05% from the same period last year, mainly due to the combined effects of rising domestic fuel prices and rising electricity generation, resulting in a substantial increase in operating costs; at the same time, the net cash flow of the company's operating activities was 3.66 billion yuan, a decrease of 7.7 billion yuan compared with the same period last year, mainly due to a large increase in coal prices. The average market price of Q3 Qinhuangdao thermal coal at 5500K is 1142 yuan / ton, up 30.7% from the previous month and 98.6% from the same period last year. High coal prices put short-term pressure on the company's performance in the third quarter. As a leading thermal power enterprise, the company has a high-quality installed structure, and its profits are expected to continue to grow in the process of a definite recovery in the industry.

The thermal power industry bottomed out and rebounded, maintaining Huaneng International's "buy" rating of high coal prices in the second half of this year, and the National Development and Reform Commission studied the establishment of a long-term mechanism of "benchmark price + fluctuation" in the coal market price. and strengthen the connection with the market-oriented electricity price mechanism of coal-fired power generation. In the long run, the market coal price center is expected to be deterministic downward, the fluctuating range of coal and electricity prices will also be gradually expanded, the coal and power industries will continue to coordinate and develop healthily, and the profits of thermal power enterprises are expected to usher in deterministic improvements. We estimate that the company's revenue from 2021 to 2023 is 182.8 billion yuan, 193.3 billion yuan and 202.8 billion yuan respectively, and the return net profit is 167 million yuan, 7.507 billion yuan and 11.698 billion yuan respectively. After deducting the interest on perpetual debt, the net profit of the corresponding company belonging to the common shareholders is-1.553 billion, 5.787 billion and 9.978 billion yuan, and the corresponding EPS is-0.10,0.37 and 0.64 yuan respectively. The company is firmly determined to transform new energy, with the rapid growth of new energy installations, the rapid development of new energy business, and the bottom rebound of the superimposed thermal power sector. we are optimistic that the company's future performance will continue to improve and maintain its "buy" rating.

Risk hint: the risk of a sharp rise in coal prices; the risk of asset impairment.