Incidents:
The company released its 2018 annual report. It achieved annual revenue of 18.527 billion yuan, an increase of 19.18% over the previous year; it achieved net profit of 691 million yuan, a decrease of 7.83% over the previous year, which was lower than Shenwan Hongyuan's forecast of 846 million yuan.
Key points of investment:
The hourly utilization of coal-fired units has declined, and the amount of clean energy generated has increased dramatically. The company achieved power generation capacity of 34.218 billion kilowatt-hours in 2018, an increase of 18.08% over the previous year. Among them, the power generation capacity of coal power was 2,045,700 kilowatts, an increase of 20.6% over the previous year. This was mainly due to the impact of Guodian Korler's 2*350,000 kilowatt unit being put into operation in the second half of 2017. In May 2018, ±800 kV UHVDC was put into operation from northwest Yunnan to Shenzhen. The number of hours used by local coal power units in Shenzhen was greatly impacted. The average utilization hours of the company's coal-fired power plant units in 2018 decreased by 169 hours over the same period last year. Shenzhen has vigorously developed combustion engine power generation in recent years. The average utilization hours of the company's gas units in 2018 increased 292 hours over the previous year, achieving a power generation capacity of 7.148 billion kilowatt-hours, an increase of 7.96% over the previous year. Benefiting from the expansion of the installed scale of wind power and photovoltaics, the company achieved 1,665 million kilowatt-hours of wind power generation in 2018, an increase of 62.3% over the previous year, and achieved a photovoltaic power generation capacity of 1,196 million kilowatts, an increase of 30.7% over the previous year.
The impact of the reduction in electricity prices for gas units in Guangdong Province is limited. The profit level of new energy and other businesses has risen rapidly, and the performance of holding subsidiaries is in line with expectations. Guangdong Province lowered gas pipe transmission fees for power plants to 0.15 yuan/cubic meter in August 2018, lowered feed-in tariffs for gas units in the province in September, and the companies Dongguan Changyang and Huizhou Fengda cut 5 minutes/kilowatt-hour (accounting for about 30% of total installed capacity). The reduction in transmission fees is difficult to cover the reduction in feed-in tariffs, but the Eastern Power Plant, which has strong profitability, is not within the scope of this feed-in tariff adjustment, and the company is less affected. The company's wind power and photovoltaic business achieved a total net profit of 532 million yuan in 2018, an increase of 35.7% over the previous year; the gas business grew rapidly, with gas supply volume of about 395 million cubic meters in 2018, an increase of 152% over the previous year; the gas business revenue was 1.26 billion yuan, an increase of 149.8% over the previous year; and revenue from the sale of Electric Power Garden real estate was 1,658 million yuan. The average business revenue and profit levels of the company's holding subsidiaries in 2018 were in line with expectations.
The increase in losses from participating in thermal power and the slow release of the performance of the Shenzhen Diefu LNG terminal have dragged down the company's overall performance. The company's net profit in 2018 fell short of expectations mainly due to two factors. Affected by high electricity and coal prices and poor utilization hours in Guizhou Province, the company's 49% shareholding loss of Zhijin Power Generation increased, contributing 115 million yuan in investment income in 2018. The CNOOC Shenzhen Diefu LNG terminal, which holds 30% of the company's shares, was put into operation in September 2018, with a design annual turnover of 4 million tons. However, due to the low turnover volume at the beginning of operation of the receiving station, the project was in a state of loss in 2018. Corresponding to the company's investment income of 4.62 million yuan, far below expectations, is expected to be released later.
Profit forecast and valuation: Combining the performance of participating companies in 2018, considering the expected decline in coal prices and the 3 percentage point reduction in value-added tax, we adjusted the 19-20 profit forecast to $1,668 and 1,928 billion ($1,423 and $1,819 million before the adjustment), adding the net profit forecast for 2021 to 2,348 million yuan, corresponding to EPS 0.42, 0.49 and 0.59 yuan/share. The current stock price corresponds to PE 16, 13, 11 times, and maintains the “increase in holdings” rating, respectively.
