Core views:
The full-year results turned a loss into a profit, and cash flow surged 691% year over year. In 2022, the company achieved revenue of 39.2 billion yuan (+27.0% year-on-year) and net profit of 321 million yuan (loss of 1,836 million yuan after adjustment for the same period last year). Turkish coal power was put into operation during the year to achieve net profit of 1,207 billion yuan, the new energy sector achieved net profit of 2,547 billion yuan, and investment income of 690 million yuan. Domestic thermal power still lost a lot due to coal prices. Net operating cash inflows were $12.1 billion ($73/16 billion in 2020/2021, respectively).
In 2022, the company completed 60.9 billion kilowatt-hours of feed-in electricity (+7.6% year-on-year), of which 405 (including Turkey 40) /66/87/51 billion kilowatt-hours for coal/gas/wind power/photovoltaics respectively.
Domestic thermal power losses were limited in 2022, and profits are expected to bottom out and recover. In 2022, the company's standard coal unit price reached 1,461 yuan/ton (+17.9% year on year), so even though electricity prices increased 19.2% year over year to 0.62 yuan/kW, there was no effective improvement in thermal power profits. Looking ahead to 2023, on the one hand, electricity prices are expected to remain high. Furthermore, domestic and foreign coal prices are showing a downward trend (Q5500 in Qinhuangdao and Q4200 in Indonesia, the latest coal prices fell 31.8% and 20.2% from last year's highs). The company's high share of imported coal is compounded by an increase in the implementation of the Changxie Coal contract, and comprehensive coal costs are expected to fall. It is expected that thermal power profits will recover.
Equity incentives point to clean energy, and expect green electricity to accelerate. The company currently holds 20.92 GW of installed capacity, 3.88/4.31 GW of wind/light respectively (0.53 GW of green electricity was added in '22), and the starting/approval is 1.2/3 GW respectively. The company's new energy goals for this year: ensure approval, commencement of construction, and commissioning of 7.9/4.6/6.8 GW, and strive to reach 11/6/10 GW respectively. Currently, module prices have fallen 13.1% from a high level, and we expect Green Electric's installation to accelerate. REITs were issued in March to raise 7.8 billion yuan (the underlying asset is the 0.5 GW Sea Breeze project, net profit of 285 million yuan in '22), which is expected to improve financial expenses and accelerate reinvestment.
Profit forecasts and investment recommendations. The company's net profit from 2023 to 2025 is estimated to be 3,010, 3979, and 4.721 billion yuan respectively. According to the latest closing price, corresponding PE is 9.30, 7.04, and 5.93 times, respectively. The company is promoting clean energy transformation, new energy planning is vigorous, and thermal power performance is expected to bottom out. Referring to peer valuation, the company was given 15 times the PE valuation in 2023, corresponding to a reasonable value of 16.03 yuan/share, maintaining the “buy” rating.
Risk warning. Coal prices continue to rise; risks such as project construction progress and electricity demand falling short of expectations.