occurrences

The company released its 2022 annual report: it achieved revenue of 39.161 billion yuan in 2022, up 27.00% year on year; achieved gross profit of 7.515 billion yuan, up 63.03% year on year; achieved net profit attributable to parent company of 321 million yuan, up 111.47% year on year.

Revenue growth in 2022 exceeded our expectations, but profit growth fell short of our expectations of achieving revenue of 39.161 billion yuan in 2022, up 27.00% year on year; achieved gross profit of 7.515 billion yuan, up 63.03% year on year; realized net profit attributable to parent company was 321 million yuan, up 111.47% year on year. The overall gross profit margin was 19.19% for the full year, an increase of 4.14 percentage points compared to the full year of 2021, and a decrease of 0.86 percentage points compared to the fourth quarter of 2022.

The company's revenue growth in 2022 exceeded our expectations, but profit growth fell short of our expectations, mainly because the revenue growth rate of the company's power generation business far exceeded our expectations. In 2022, the company generated a total of 63,728 million kilowatt-hours of electricity, an increase of 6.67% over the previous year, but revenue increased 27.00% year on year, mainly because the company's average electricity sales price exceeded expectations. At the same time, the company's annual comprehensive gross profit margin was 19.19%, and the net profit margin was 4.05%, which was slightly lower than our expectations of 21.15% and 5.05%.

The increase in the company's electricity business revenue exceeding expectations was mainly that the price of electricity sold exceeded expectations, but the company's financial expenses were properly controlled, and the overall cost rate declined markedly year-on-year

From January to December 2022, the company completed consolidated caliber power generation capacity of 63,728 million kilowatt-hours, an increase of 6.67% over the previous year, and the feed-in capacity was 609.16 kilowatt-hours, an increase of 7.57% over the previous year. The company's consolidated discounted coal unit price (tax included) was 1461.32 yuan/ton, an increase of 17.86% over the previous year.

The company is focusing on fuel supply and price control, and is committed to improving the long-term compliance rate of coal combustion agreements. The gap between coal prices in the Shanghai region has been drastically reduced. At the same time, it has strengthened plant management, strictly controlled thermal value differences and losses, and reduced fuel costs. At the same time, the company's average electricity price has risen more than expected, and the regional advantage is obvious. However, the recovery in gross margin of the power business is still slightly below our expectations. The company's leverage reduction and policies have achieved remarkable results, and the increase in financial expenses has clearly slowed. The balance ratio at the end of 2022 was 72.63%, down 3.13 percentage points from the previous year. The company's financial expenses added in 2022 were lower than our expectations. The financial expense ratio and overall expense ratio continued to decline year on year, and the performance was better than our expectations.

Profit forecasting

The company's profit performance in 2022 was lower than our forecast. We adjusted the profit forecast appropriately based on the company's 2022 operating conditions. It is estimated that in 2023-2025, the company will achieve operating income of 48393 billion yuan, 598.73 and 74.155 billion yuan, net profit attributable to the parent company of 577, 816 and 1,199 million yuan, and a total share capital of 2,817 million shares, corresponding to EPS 0.20, 0.29 and 0.43 yuan. On March 30, 2023, the stock price was 9.79 yuan, corresponding to a market value of 27.6 billion yuan. The 2023-2025 PE was about 48, 34, and 23 times.

Risk warning: The construction of new energy projects falls short of expected risks, green power transactions and premiums fall short of expected risks, the risk of renewable energy subsidy repayments falling short of expectations, economic recovery falling short of expectations, and rising electricity prices falling short of expectations.