Events:
The company announces its semi-annual report 2020. In the first half of the year, the company realized operating income of 2.545 billion yuan, a decrease of 25.21% over the same period last year, and a net profit of 133 million yuan, a decrease of 47.7% over the same period last year. In the second quarter, the single-quarter net profit was 102 million yuan, an increase of 210.5% over the same period last year, in line with expectations.
Main points of investment:
The epidemic eased in the second quarter, and the growth rate of electricity consumption in Hubei Province rebounded sharply. The company's units are all located in Hubei, affected by the epidemic, the company's power generation fell by 40.7% in the first quarter compared with the same period last year, ranking in the forefront of listed thermal power companies in China. However, since the second quarter, the growth rate of electricity consumption in Hubei Province has returned to a higher than expected. The monthly growth rate of electricity consumption in April, May and June is-5.42%, 2.52% and 3.03% respectively, and the company's power generation in the second quarter increased by 1.71% compared with the same period last year. In fact, Hubei Province has benefited from the industrial transfer of the Yangtze River Economic Belt and the development of its own high-tech manufacturing industry in recent years, and the growth rate of electricity consumption has long been in the first echelon of provincial regions. We judge that in the post-epidemic era, the high growth momentum of electricity consumption in Hubei Province is expected to continue, and the short-term impact will not affect the long-term value of the company.
Benefiting from the decline in coal prices in the second quarter, the single-quarter performance improved significantly. Although the company's cumulative performance in the first half of the year declined significantly compared with the same period last year, the company's single-quarter net profit increased by more than 200% in the second quarter compared with the same period last year. Affected by the epidemic situation, coal prices in China showed a deep "V" in the second quarter.
The trend is in the downward channel as a whole. under the combination of profit factors with a strong rebound in electricity generation, stable electricity prices and a sharp decline in coal prices, the company's single-quarter gross profit margin reached 16.61% in the second quarter, nearly double that of the same period last year. However, on the other hand, from the operation results in the first half of the year, the construction of supporting collection and transportation facilities of Hao-Ji Railway lags behind, and the initial transport volume is lower than expected. The decline in coal prices in Hubei Province in the first half of the year is mainly due to the loosening of national coal supply and demand, and the advantages of the new railway are expected to be gradually released in the follow-up.
It is proposed to increase the purchase of 100% equity in Hubei Electric Power + the construction of Suizhou Power Plant, and the installed scale of the company will be more than doubled. The company announced in May that it plans to purchase a 100% stake in Hubei Electric Power from SEO, with a total installed capacity of 3.423 million kilowatts, equivalent to the existing controllable total installed capacity of listed companies (369.43 kilowatts). Hubei Electric Power includes Hanchuan Power Generation (21 million kilowatts), Qingchuan Thermal Power (23.5 million kilowatts), Enshi Hydropower, Zhuxi Hydropower and Wuhan fuel Company, with high overall quality. In addition, the company announced in June that it would invest about 5 billion yuan to build a 260,000 kilowatt unit project in Suizhou. After the completion of the above acquisition and endogenous growth, the installed capacity of the company will exceed 8.5 million kilowatts, and the problems of inter-industry competition and long-term development are expected to be solved.
Profit forecast and valuation: excluding unit acquisition for the time being, we maintain the forecast of the company's 2020-2022 return net profit of 4.55,9.04 and 954 million yuan. Corresponding to the current stock price PE is 10, 5, 5 times. Although the epidemic put pressure on the company's performance in 2020, we still emphasize that in the long run, the company is the most definitive target for the commissioning of Haoji Railway. Both the company and Shenhua Group belong to the National Energy Group, and the existing power plants and the proposed thermal power assets are adjacent to the Haoji Railway, while benefiting from the long-term high growth rate of electricity consumption in Hubei Province, the current valuation is attractive and maintains a "buy" rating.
