Main points of investment:
Events. The company announced its annual report on March 31: in 2016, the company achieved operating income of 2.381 billion yuan, down 7.01% from the same period last year; net profit belonging to listed companies was 283 million yuan, down 36.52% from the same period last year; deducting 267 million yuan from non-net profit, an increase of 39.85% over the same period last year; split by single quarter, 4Q16 achieved operating income of 693 million yuan, down 66.32% from the same period last year; and net profit attributed to listed companies was-1.76 million yuan.
At the same time, the company announced a profit distribution plan: 1.00 yuan (including tax) for every 10 shares, with an increase of 10 shares.
Rising coal prices dragged down performance in the second half of the year. The decline in the company's performance in 2016 was mainly due to the decline in the profitability of the traditional main business. The gross profit margin of electricity and heat sales fell 7.87% and 17.79% respectively compared with the same period last year, and the decline was mainly concentrated in the second half of the year. The company's revenue fell by 7%, while the cost of fuel and materials in the cost composition increased by 8% and 4% respectively. The rise in coal prices in the second half of the year weighed on the company's performance.
The asset securitization rate of SPIC Group needs to be improved urgently. According to the group's official website, State Power Investment currently has a total installed capacity of 117 million kilowatts, including 21.5967 million kilowatts of hydropower, 4.4752 million kilowatts of nuclear power, 7.1184 million kilowatts of solar power, 11.9822 million kilowatts of wind power, and 42.9 percent of clean energy, ranking first among the five major power generation groups. However, according to our estimates, SPIC's asset securitization rate was only 27% at the end of 2015, ranking the lowest among the five major power generation groups. We believe that with the deepening of the reform of state-owned enterprises, there is a lot of room for SPIC to inject assets (including a large number of photovoltaic, wind power, nuclear power high-quality assets) into his company in the future, which will greatly benefit Oriental Energy.
Hebei Power Investment assets are entrusted to Dongfang Energy. According to the official website of the State Power Investment Hebei Power Company, since 2014, Hebei Power Investment assets have been fully taken over by Oriental Energy, implementing the integrated operation of "two brands, one team", demonstrating the State Power Investment's determination to build Orient Energy into a clean energy platform in North China. Hebei Power Investment currently has clean energy 737.7MW, including wind power 148.5MW and photovoltaic 589.2MW.
The new energy business continues to expand. The company takes Hebei as the center, and the development of new energy extends to the whole of North China. According to the company's annual report, it has completed the strategic layout of four blank points in the province and the surrounding provinces such as Shanxi, Inner Mongolia and Henan, and the platform effect has begun to appear.
Profit forecast and investment rating. The company has completed the integration of thermoelectric assets in North China, and is expected to build a clean energy operation platform for the group in the future. We estimate that the EPS of the company from 2017 to 2019 will be 0.89,1.16,1.44 yuan respectively. With reference to the comparable valuation of the same industry, we will maintain the "buy" rating according to the target price of 22.25 yuan and 25 times PE in 2017.
Risk hint. Coal prices rose; the reform of state-owned enterprises was lower than expected.
