Performance review

1H22's performance is slightly better than we expected.

Jilin Electric Power Co., Ltd. announced 1H22 results: the company's operating income in the first half of the year was 7.701 billion yuan, an increase of 20.86% over the same period last year; the net profit returned to its mother was 754 million yuan, an increase of 0.91% over the same period last year. Of this total, 2Q realized operating income of 3.41 billion yuan, an increase of 19.2% over the same period last year, and a net profit of 339 million yuan, an increase of 5.4% over the same period last year.

The profit performance is slightly stronger than we expected and better than other thermal power enterprises.

The installed capacity of new energy has increased steadily, and the profit contribution has increased year by year. As of June 30, the company's new energy installed capacity of 8.9056 million kilowatts, accounting for 72.96% of the total installed capacity, year-on-year uplink 7.66ppt.

In the first half of the year, the company added 1.76 million kilowatts of installed capacity, stronger than we expected, and the increase in installed scale led to a higher contribution to the profits of the new energy sector. In details, photovoltaic contributed gross profit of 1.021 billion yuan, up 70% from the same period last year, and gross profit margin rose 5.3ppt to 54.17% compared with the same period last year. However, gross profit contributed by wind power was 828 million yuan, which remained the same as that of the same period last year. Poor wind conditions across the country offset the contribution of new installed capacity, and gross profit margin of wind power fell to 55.55% from the same period last year.

Revenue from thermal power has contributed strongly, and rising fuel costs have dragged down gross profit margins year-on-year. In the first half of the year, the company's thermal power operating income was 2.37 billion yuan, up 7.39% from the same period last year, accounting for 30.8% of revenue. Electricity price performance is excellent, but electricity is damaged. According to Jilin Province's January-June power generation data, Jilin thermal power utilization hours in the first half of the year decreased by 9.5% compared with the same period last year, of which 2Q utilization hours decreased by 17% compared with the same period last year. On the cost side, unit fuel costs remain high, with the industry's average unit fuel costs rising by 40% Mel 50% year-on-year. The company's first-half gross profit margin for thermal power fell to 19.63% compared with the same period last year.

Affected by renewable energy subsidies, cash and operating cash flow improved. The company's cash increased to 2.47 billion yuan from 930 million yuan at the beginning of the year, and operating cash flow increased to 4.61 billion yuan from 1.67 billion yuan in the same period last year, mainly due to the rebate of renewable energy subsidies and increased revenue from thermal power.

Trend of development

Agricultural light complementary, pumping, hydrogen energy multi-faceted layout, new energy transformation non-stop. In order to increase the proportion of clean energy, in August the company's wholly-owned subsidiary, Wazhong, Guangxi, plans to invest 300MW Yongning Ji Dian Baiji Xinping Agricultural complementary Power Generation Project in Nanning, Guangxi; in May, the company signed an agreement with the people's Government of Wangqing County, Jilin Province to promote the development and construction of 5000MW pumped storage project in Wangqing River Basin; in January, the company participated in the establishment of electric hydrogen energy fund, which is conducive to the layout of hydrogen energy and emerging industries and accelerate the pace of transformation and development.

Profit forecast and valuation

As a result of the sharp rise in electricity prices, we raised the 2022 Compact's operating income by 14% of 2023 to 15.79% to 17.88 billion yuan, but we kept the company's profit forecast unchanged considering the fuel cost dragging down the profit performance of thermal power. The current share price corresponds to 21.5 times the price-to-earnings ratio of 21.5 pounds in 2023. We maintain an outperform industry rating with a target price of 9.24 yuan. Corresponding to the price-to-earnings ratio of 27x27x2022max 2023, there is 26% upside compared to the current share price.

Risk.

New energy installation is not up to expectations, coal prices remain high