Core views:
First-quarter results surged 231% year on year, and cash flow continued to recover. The company disclosed the first quarter report of 2023, achieving revenue of 10.342 billion yuan (+23.4% year-on-year) and net profit of 335 million yuan (+230.6% year-on-year, profit of 321 million yuan for the full year of 2022). The sharp improvement in performance is expected to be due to the full commissioning of coal power projects in Turkey in October last year (achieving net profit of 1.2 billion yuan in 2022) and an 18.2% increase in feed-in electricity capacity for new energy sources over the same period last year. In addition, the company's investment income contributed 124 million yuan (down 162 million yuan from the previous year), and the net operating cash flow reached 1,318 million yuan (+80.2% year-on-year).
Domestic thermal power losses are expected to decrease in the first quarter, and the certainty of profit turnover in the second quarter will increase. The 2023Q1 feed-in capacity was 16.983 billion kilowatt-hours (+22.2% year-on-year), of which coal/gas/wind power/photovoltaic/photovoltaics were 120/14.3/24.1/1,111 billion kilowatt-hours; feed-in electricity prices were 0.63 yuan/kilowatt-hour (+9.8% year-on-year).
Looking ahead: (1) The company's share of imported coal is high (Shanghai imported coal accounted for 65% in 2021); in January-January, China's thermal coal imports surged 96.5% year on year, and prices fluctuated downward; (2) the long-term cooperation ratio is expected to continue to rise under tighter insurance and supply; (3) domestic spot coal prices have once again reached a new low, falling below 1,000 yuan/ton; with the improvement of comprehensive coal costs, thermal power as a whole is expected to change from loss to profit.
Equity incentives point to clean energy, and expect green electricity to accelerate. The company currently holds 20.93 GW of installed capacity, and 3.88/4.33 GW of wind/light respectively; this year's new energy target: ensure approval/startup/commissioning of 7.9/4.6/6.8 GW, striving to reach 11/6/10 GW. Currently, module prices have fallen 14.1% 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 Haifeng project, net profit of 285 million yuan in '22), which is expected to improve financial expenses and accelerate reinvestment (23Q1 financial expenses fell 119 million yuan year over year, and financial rates were reduced 3.3 pct year over year).
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 9.65, 7.30, and 6.15 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.