Incidents:
The company published its 2022 annual report and 2023 quarterly report. In 2022, revenue was 10.683 billion yuan, down 5.7% from the previous year; net profit returned to the mother was 680 million yuan (excluding 286 million yuan), a year-on-year decrease of 32.92% (a decrease of 50.57% after deducting). The profit distribution plan is to distribute a cash dividend of 1.9 yuan (tax included) for every 10 shares.
The first quarter of 2023 achieved revenue of 2,855 million yuan, an increase of 9.57% over the previous year; net profit of the mother was 325 million yuan (excluding 105 million yuan), an increase of 91.07% over the previous year (up 6.27% after deducting).
Profitability improved in the first quarter. Net operating cash flow increased sharply in 2022 by 15.15% (year-on-year -7.7pct), net interest rate 6.14% (year-on-year -5.1pct), net interest rate after deduction of 2.68% (year-on-year -2.36pct), and ROE (weighted) 7.39% (year-on-year -9.02pct), mainly due to sharp increases in fuel prices such as natural gas, which affected thermal power's profitability.
The overall gross profit margin for the first quarter of 2023 was 16.78% (-1.79pct year on year), net interest rate was 11.52% (+4.49pct year on year), net interest rate after deduction was 3.67% (year-on-year -0.11pct), ROE (weighted) 3.11% (+0.85pct year on year), and profitability improved. Net operating cash flow was $538 million (+97.6% YoY).
Profitability is expected to continue to rise. The construction of integrated energy stations has entered an acceleration period. In terms of green energy business, the revenue of the power business in 2022 was 5.774 billion yuan (-13.22%), and the gross profit margin was 15.09% (-9.37% year-on-year). Since fuel prices such as natural gas remained high throughout 2022, although the electricity prices of combustion engine companies were linked to a certain extent, they were still unable to absorb all of the cost increases, leading to a decline in the profitability of the power business. Since 2023, high fuel prices such as natural gas have declined, and profits have improved markedly. As of April 20, the average domestic LNG market price was 4,503 yuan/ton, down 37% year-to-date. We expect that as domestic energy production and supply increase and international geopolitical conflict factors ease, the average price of natural gas for the whole year is expected to drop sharply year on year, and the profitability of the power business is expected to continue to rise.
In terms of the mobile energy business, there were 115 integrated energy stations operated and under construction by the company as of the end of the first quarter (72 passenger cars, 43 commercial vehicles), of which 13 were added in the first quarter. In 2022, construction progress fell short of expectations due to the epidemic and other factors. We expect the construction of integrated energy stations in 2023 to accelerate as the epidemic unfolds and the overall economy recovers.
The pumped energy storage project progressed steadily. At the end of the first quarter, the total grid-connected installed capacity of the company was 3659.04 MW, including 2437.14 MW of cogeneration of combustion engines, 743.9 MW of wind power, 60 MW of biomass power generation, 116 MW of waste power generation, and 302 MW of coal-fired cogeneration. In addition to coal-fired 302 MW, clean energy, mainly natural gas and wind energy, account for more than 90% of the installed capacity. The Jiande Pumped Storage Power Plant Project (2,400MW) controlled by the company has been included in the “14th Five-Year Plan” for energy development in Zhejiang Province and approved by the Zhejiang Provincial Development and Reform Commission. At present, the project has begun and is progressing steadily according to the construction nodes. The GCL Gaochun 2×100 MW cogeneration gas engine cogeneration project, in which the company participated, was fully put into operation in the first quarter.
[Increase e_ZixingumaKeRi Technology] Lay out the computing power circuit to build large-scale zero-carbon computing power in the AI era. On April 3, the company announced that the holding subsidiary will invest 300 million yuan to increase the capital of Starlink Technology, and will hold 10% of Starlink Technology's shares after the capital increase is completed. Starlink Technology specializes in the construction of high-performance computing power infrastructure, computing power output and technical services for GPUs, and has a complete technology platform covering the three levels of IaaS, PaaS, and MaaS. In the future, the company will use its industrial advantages and current business layout from power generation to distribution of electricity, mobile energy storage and energy efficiency management to provide green and low-carbon energy solutions for AI computing power business. Starlink Technology will provide customers with single-phase submersible battery pack cooling solutions and superior resources and high-quality products related to AI computing power services, and jointly provide customers with “electricity+storage+computing” integrated services to create large-scale zero-carbon computing power in the AI era.
Valuation analysis and rating instructions
The company's net profit for 2023-2025 is estimated to be 1,413 billion yuan, 1,825 billion yuan, and 2,256 billion yuan respectively. The corresponding PE is 15.4 times, 11.9 times, and 9.6 times respectively, maintaining the “recommended” rating.
Risk warning:
The construction of integrated energy stations fell short of expectations; the utilization rate of integrated energy stations fell short of expectations; feed-in electricity prices declined; fuel costs rose, etc.