Incident summary: On April 27, the company released its 2022 annual report. It achieved operating income of 4,598 million yuan during the reporting period, an increase of 42.14% over the previous year (as repeated); net profit attributable to shareholders of listed companies was 775 million yuan, an increase of 12.47% over the previous year (as repeated); deducted non-net profit attributable to shareholders of listed companies was 538 million yuan, a year-on-year decrease of 7.04% (as repeated). The company plans to distribute a cash dividend of 0.08 yuan (tax included) per share to all shareholders. The company released its report for the first quarter of 2023. During the reporting period, it achieved operating income of 1,046 million yuan, a year-on-year decrease of 0.31%; net profit attributable to shareholders of listed companies was 121 million yuan, a decrease of 40.79% over the previous year; deducted non-net profit attributable to shareholders of listed companies was 113 million yuan, a year-on-year decrease of 40.95%.
Poor incoming water affected performance in a single quarter: in 1Q23, the company's hydropower feed-in capacity was 425 million kilowatt-hours, a year-on-year decrease of 30.6%. The decline in hydropower capacity and revenue was difficult to cover fixed costs such as utility depreciation, and hydropower performance dragged down overall performance. In 4Q22, the company achieved operating income of 999 million yuan, net profit loss of 86 million yuan, and net profit loss of 120 million yuan after deducting non-return mother's net profit. Losses were recorded in a single quarter or were also due to poor water supply.
When the fixed increase comes to fruition, Zhejiang Haifeng may have a surprise: Q1's wind power completed the feed-in capacity of 745 million kilowatt-hours, an increase of 39.8% over the previous year, including 384 million kilowatt-hours of land wind and 361 million kilowatt-hours of sea wind. On April 20, the company announced that it would issue 325 million shares at 924 yuan per share to complete the private offering, successfully raising net capital of 2,998 million yuan. The Taizhou No. 1 300,000 kilowatt Sea Wind Project received sufficient “ammunition” for development. After the project is put into operation, the company's performance will be further enhanced. Furthermore, on March 27, the Zhejiang Provincial Development and Reform Commission issued the “Implementation Opinions on Promoting High-Quality Development of New Energy in Zhejiang Province (Draft for Comments)”. The article mentions speeding up the construction of Zhejiang offshore wind power base. Currently, Zhejiang Province's “14th Five-Year Plan” plans to add 4.5 million kilowatts of seabreeze installations. Compared with other coastal provinces, the overall planning scale of other coastal provinces is small. If Zhejiang accelerates seabreeze development in the province and adjusts the “14th Five-Year Plan” plan, the company is expected to fully benefit from its location advantage.
Investment advice: Poor incoming water is dragging down performance in the short term, and the development of the Taizhou No. 1 Seabreeze project is expected to accelerate. Considering electricity volume, electricity prices, and installation pace, without considering the fixed increase and share capital adjustments, it is estimated that the EPS for 23/24 will be 0.53/0.70 yuan respectively (previous value of 0.61/0.70 yuan), and the additional 25-year EPS will be 0.87 yuan. Corresponding to the closing price PE on April 28 is 21.1/16.1/13.0 times, respectively. Referring to industry-comparable company valuations and company performance, the company was given 25 times more PE in 2023, corresponding to the target price of 13.25 yuan, maintaining the “careful recommendation” rating.
Risk warning: 1) Incoming water from the basin is running out; 2) falling demand suppresses electricity consumption; 3) Market transactions and electricity price fluctuations; 4) policy adjustments such as fiscal taxation.