As a core thermal power enterprise in Jiangsu Province, thermal power units have advantages in the two dimensions of “quantity” and “quality”. By the end of the 22nd, the company's share of thermal power installed capacity in the province ranked second. The holding had 144.37 million kilowatts of thermal power installed, and the capacity of thermal power units to be transported will increase by 48.5% after the 7 million kilowatt thermal power units under construction and the approved 7 million kilowatt thermal power units are put into operation. Furthermore, the proportion of coal power units operating 600,000 kilowatts or more and super supercritical and above exceeds 94% and 50%, respectively. Comparable companies' share indicators are distributed at 60%-80% and 35%-48%, respectively. The structural advantages of the company's core thermal power units are prominent.

The supply and demand for electricity in Jiangsu showed a tight pattern, which is conducive to maintaining the stability of high electricity prices. (1) Supply side: On the power supply side within the province, it is difficult for the power supply main thermal power to be put into production in 23-24 years to contribute substantial increase, and the pressure on existing units to guarantee supply is high; in terms of receiving electricity from outside the province, the increase in power reception outside Jiangsu in 23-25 mainly comes from the current UHV supply increase, while it is expected that the ability of major power transmission provinces to help each other in 23 years will be limited. (2) Demand side: In the long run, electricity demand in Jiangsu Province remains high and continues to be driven by a high share of secondary production and a high population base. The company's thermal power usage hours in 21-22 were 4688/4515 hours, respectively, which is more than 90 hours higher than the average of comparable companies; in the short term, the high increase in electricity demand in 23 years mainly stemmed from the high elasticity of post-epidemic repair and the year-on-year increase in electricity consumption load during peak summer. Combined with the supply and demand situation, the average number of hours used for thermal power in Jiangsu is expected to remain above 4,400 hours in 23-24. Tight supply and demand will also provide strong support for rising electricity prices and maintaining high operation levels.

The company's coal costs have both economic advantages and marginal improvement advantages. The company's unit layout is located in Kengkou, Jinbei, and Jiangsu near the Jianghai region. The geographical advantage can effectively reduce coal transportation costs; furthermore, the company has developed an independent coal supply system, which is deeply integrated with thermal power, coal procurement, and port logistics to facilitate cost control. In addition, the coal insurance and supply policy helped the company increase its share of 23-year long-term coal by 30 pct to 80%, and the continued release of coal supply has driven the coal price center in the 1H23 market back 30% to about 800 yuan/ton. It is expected that in 23-25, the coal price center in the market will drop further to 780/745/710 yuan/ton, corresponding to 780/700/680 yuan/ton, respectively.

The financial sector has high-quality assets and steady returns, and is positioned as a “ballast stone” of performance. The financial sector business is mainly carried out by the subsidiary Jiangsu Trust. Over the past 5 years, it has continued to contribute an average annual net profit of about 2 billion yuan to the company. The foundational role of performance is outstanding, and it can also provide synergistic effects such as capital allocation and carbon asset management for the energy sector business. Furthermore, the financial sector's inherent business is performing steadily because it benefits from high-quality assets. Through product transformation, the trust business has gradually escaped the influence of the new asset management regulations and is on a performance repair track. It is expected that the overall impact on financial sector performance growth in the context of interest rate cuts will be limited, and the net profit growth rate of the financial business will still reach 15%/10%/10% in 23-25.

Profit forecasts, valuations, and ratings

We forecast that in 23-25, the company's revenue was 338.9/357.1/39.05 billion yuan, and net profit of 2,46/34.7/4.04 billion yuan. Using the segmental valuation method, the energy/banking/non-banking sector was given 14/5/15XPE in '24, corresponding to the target price of 7.7 yuan in '24. For the first time, it covered the “increase in holdings” rating.

Risk warning

The progress of new projects fell short of expectations; the demand for thermal power in the province fell short of expectations; the signing and implementation of contracts by the Association of Coal Ministers fell short of expectations and the decline in coal prices fell short of expectations; financial business profit stability was insufficient.