Event description
Xichang Electric Power issued a mid-term performance forecast for 2016, which is expected to be about 2.3 million yuan in the first half of 2016, an increase of about 900 percent over 229100 yuan in the same period last year.
Event comment
The increase in electricity demand in Liangshan Prefecture led to an increase in electricity sales revenue, and a reduction in investment losses boosted first-half results. The company sold 682 million kilowatt-hours of electricity in the first half of 2016, an increase of 9.86 percent over the same period last year. The company's power supply customers are mainly residents and commercial customers, and the electricity demand in the company's power supply area exceeded the national average during the reporting period, driving up the company's electricity sales and operating income. As the year-on-year growth rate of spontaneous electricity is lower than that of electricity sales, the optimization effect of power purchase cost structure brought by self-power generation is limited. In addition, due to losses dragging down the company's performance of 5.679 million yuan in the first half of 2015, Sichuan Kangxi Copper, a joint venture invested by the company, had a small performance base in the same period last year.
The overhaul of the power station in April reduces the spontaneous power output, which verifies that Fengshui expects a better performance in the second half of the year. In terms of electricity generation, the company achieved 226 million kilowatt-hours of spontaneous electricity in the first half of the year, an increase of 2.45 percent over the same period last year. Of this total, electricity generation in the first quarter was about 136 million kilowatt hours, an increase of 35.73 percent over the same period last year, and that in the second quarter was about 89.7817 million kilowatt hours, a decrease of 25.33 percent over the same period last year. The main reason for the decrease in power generation in the second quarter is that due to better water supply in the first quarter, the company postponed the maintenance time of its subordinate power stations to April this year, and the overhaul lasted about a month, resulting in a reduction in the output of subordinate power stations in the second quarter. The power generation of the company's power stations increased significantly in the first quarter, and can still complete about 75% of the electricity generation in the same period last year under the premise of an one-month shutdown in the second quarter. Fengshui is expected to be verified this year. As the second half of the year officially enters the flood season, we can expect the company's power generation to increase significantly compared with last year, optimize the company's power purchase costs and boost the company's annual profits.
The construction of Muli Guzeng power station is expected to restart, and the commissioning of photovoltaic power station will open a new profit growth point. In January 2015, the company appealed against the illegal bidding of Muli Guseng Power Station and filed a lawsuit against 8 supervision and construction units. In November 2015, regulated by the Sichuan Provincial higher people's Court, the company reached an agreement with three of the companies, the problems left over from the history of bidding began to be solved positively, and the construction is expected to restart. The installed capacity of Muli Guzeng Power Station is 172000 kilowatts, with 64% of the company's shareholding. its installed capacity is the same as the company's existing total hydropower installed capacity (1795 million kilowatts). After it is put into production, the company's spontaneous electricity production capacity is expected to double. In addition, the Tangniwan photovoltaic power station, which is 51% controlled by the company, was connected to the grid on December 31, 2015, and the generated electricity was sold to the State Grid Sichuan Electric Power Company. In the first half of 2016, the Tangniwan photovoltaic power station had an online capacity of 27.1744 million kilowatt-hours, bringing new profit growth for the company, and the company can be expected to make further progress in new energy power generation in the future.
Investment advice and valuation: the company's EPS from 2016 to 2018 is expected to be 0.226, 0.266 and 0.287 respectively, considering that: 1) the electricity demand in Liangshan Prefecture is growing steadily, the growth rate is higher than the national average, and the company's electricity sales are expected to continue to rise; 2) the annual water supply is abundant, spontaneous electricity is expected to rise, and the power purchase cost structure is expected to be optimized. 3) the construction of Muli Guzeng Power Station is expected to restart, and the spontaneous electricity production capacity is expected to rise significantly in the future. New Energy opens a new profit growth point for the company, giving a "overweight" rating for the first time.
Risk hints: systemic risk, water fluctuation risk, project promotion less than expected risk, electricity price risk