Incidents:
(1) On April 4, the company issued a fixed increase plan: it plans to issue no more than 272.9 million A-share shares to no more than 35 specific investors, including the controlling shareholder Dongfang Electric Group, to raise no more than 5 billion yuan in capital (the group subscribes 500 million yuan), of which about 2,527 million yuan will be used to acquire all of Dongfang Electric, Dongfang Steam Turbine, Dongfang Boiler, and Dongfang Heavy Machinery held by the Group. About 1,195 million yuan was spent on construction projects, and the remaining 1,278 million yuan was used to supplement working capital.
(2) On the same day, the company announced a shareholder return plan for the next three years. The cumulative profit distributed in cash for 23-25 was not less than 30% of the realized distributable profit.
Key points of investment:
After the fixed increase is completed, the company basically fully controls the core assets of the group, increasing the company's net profit to the parent in the future. Dongfang Electric, Dongfang Steam Turbine, and Dongfang Boiler are the core subsidiaries of the company and group. They undertake the manufacturing of core equipment in the coal power, nuclear power, gas and electricity, hydropower, wind power, etc., while Dongfang Heavy Machinery mainly undertakes the manufacturing of nuclear power and nuclear island equipment. The total operating income of the four subsidiaries in 2022 was 33.74 billion yuan, accounting for 62.3% of the company's operating income. The total net profit attributable to the parent was 2.24 billion yuan, accounting for 74.4% of the company's net profit. This fixed increase acquired 8.14%, 8.70%, 4.55%, and 5.63% of the shares of the above four subsidiaries held by the Group respectively. After the fixed increase was completed, the proportion of shares held by the company in the above four subsidiaries reached 100%, 100%, 99.90%, and 53.80% respectively. After increasing the share share, the increase in the share share had an effect on increasing the company's net profit.
Assuming that the acquisition is completed at the end of 2023, the company's operating data for 2024 is the same as in 2022, and the issue price is 18.32 yuan/share (calculated based on the current plan to raise no more than 5 billion yuan and 272.9 million shares), then net profit attributable to the mother in 2024 will increase by about 160 million yuan. Overall calculation will lead to EPS dilution of about 2.9% in 2024. Considering that the company's coal, electricity, gas and electricity businesses will grow significantly in the next 2 to 3 years, the performance of the four subsidiaries will grow faster than other business segments, so it is expected that EPS dilution will be less than the above estimates.
The capital raised about 1.2 billion yuan to enhance the development capacity of businesses such as savings and combustion engines. In addition, the company also announced four construction projects, including the pumped energy storage development and upgrading project, the gas engine rotor processing and manufacturing upgrade project, the Dongqi digital workshop construction project, and the Dongguo digital construction project, with a total investment of about 2.05 billion yuan, of which 1,195 million yuan was raised using this fixed increase. Since the introduction of the dual carbon target and the introduction of electricity prices for the savings system, there has been a marked increase in enthusiasm for savings construction. In 2022, China approved a total of 48 pumped storage power plant projects, with a total scale of 68.9 GW, five times that of 13.8 GW in 2021. The peak of pumping equipment bidding and construction is expected to arrive. The company's fund-raising to improve research and development capacity also validates expectations of increased industry sentiment, proving that domestic pumping equipment production capacity is tightening, and the volume and price of domestic storage equipment are expected to rise sharply in the future. Furthermore, the company continues to increase its investment in the R&D and manufacture of heavy gas turbines, which is also of great significance in enhancing China's industrial equipment manufacturing capacity and promoting the achievement of the dual carbon target.
Publish a shareholder return plan with a cash dividend ratio of not less than 30%. On the same day, the company released the “Shareholder Return Plan for the Next Three Years (2023-2025)”. The company's accumulated profit distributed in cash in the last three years was no less than 30% of the average annual distributable profit achieved in the last three years when no profit was distributed positively. At the same time, a differentiated dividend plan is proposed. If the company's development stage is mature and there are no major capital expenditure arrangements, when profit distribution is carried out, cash dividends can account for at least 80% of this profit distribution.
Profit forecast and rating: Since the issuance date, issue price, and actual amount of capital raised for this fixed increase have not been determined, the company's financial statements and profit forecasts will not be adjusted for the time being. It is estimated that the company's net profit from 2023 to 2025 will be 38.6, 53.1, and 6.14 billion yuan respectively. The current stock price corresponding to PE is 15, 11, and 9 times, respectively, and continues to maintain the “buy” rating.
Risk warning: Investment in thermal power falls short of expectations, and approved commencement of pumped storage construction falls short of expectations