Report summary:
Guangzhou is a leading integrated energy company, strengthening, improving and expanding the green energy industry. Guangzhou has developed into a large state-owned listed company in Guangzhou. Its business includes electricity, energy logistics, gas, new energy, and energy finance. During the “14th Five-Year Plan” period, the company focused on increasing green energy. It is estimated that by the end of the “14th Five-Year Plan”, the installed capacity of natural gas and new energy will reach more than 10 million kilowatts, accounting for more than 75%. The natural gas supply volume will reach 6 billion cubic meters, doubling.
Electricity: The regulation of coal prices and gas prices is superimposed on electricity prices, and the integration of gas and electricity sales creates core competitiveness. The company is deeply involved in Guangdong, a major power province. Currently, thermal power has a controllable installed capacity of 4,035 million kilowatts (coal/gas-power accounts for 78%/22%). The implementation of gas power plants will accelerate during the “14th Five-Year Plan” period to further optimize the company's power structure. There is a clear downward trend in coal prices, gas prices, and freight prices in Guangdong have further increased in 2023. At the same time, the company has established an integrated gas and electricity sales industry chain layout, which has advantages in terms of procurement costs and electricity sales prices. It is expected that the company's thermal power profitability will improve markedly in 23, leading to a reversal of the difficult situation.
New energy: The scale of green power is growing rapidly, and the year of photovoltaic installations is approaching. The company is actively developing the new energy business, mergers and acquisitions and self-built two-wheel drives. In 2021, the installed capacity of wind power increased by 228.8% to 996,200 kilowatts, and the installed capacity of photovoltaics increased to 1,227 million kilowatts in 2022.
During the “14th Five-Year Plan” period, Guangdong Province's new energy policy was intensively introduced. The price of silicon materials dropped significantly in 2023, reducing the cost of PV installations. It is expected that the new photovoltaic installation year is approaching. The company's current new energy reserves exceed 7 GW, and it is expected that the new energy business will develop at an accelerated pace.
Natural gas: The development foundation is solid, and the whole industry chain has been further improved. The company is the sole purchaser of gas in Guangzhou, coordinating the city's high-pressure pipeline network construction, upstream gas source procurement, downstream gas distribution and distribution. In 2022, natural gas sales volume reached 2,035 billion cubic meters. At present, the company has initially built and formed an autonomous and controllable multi-gas source supply system. The midstream is speeding up the construction of the Guangzhou LNG emergency peak diversion gas source project, the downstream is speeding up the construction of the Guangzhou Natural Gas Utilization Project Phase IV, and is vigorously expanding users through the renovation of old buildings and the same period in urban villages.
Investment advice: We expect the company's operating income from 2023-2025 to be 51,47/534.41/55414 billion yuan, respectively, and net profit from the mother's net profit of 1,720/17.80/1,855 billion yuan respectively. The corresponding PE is 12.94x/12.50x/12.00x, covered for the first time, and given a “buy” rating.
Risk warning: coal prices and LNG prices rose more than expected; new energy installation progress fell short of expectations; electricity price fluctuations exceeded expectations; profit forecasts and valuation models fell short of expectations, etc.