Event: Dentsu Energy released its semi-annual report for 2023. In the first half of 2023, the company achieved operating income of 13.209 billion yuan, -3.04% year-on-year; net profit of 2,583 billion yuan, +10.67% year-on-year; and basic earnings per share of 1.23 yuan. In the second quarter of 2023, the company achieved operating income of 6.365 billion yuan, -1.33% year on year, -6.99% month on month, net profit of 966 million yuan, +17.82% year on year, and -40.31% month on month. Our comments on this are as follows:
Coal sector: Volume and price have risen sharply, costs have been reduced and efficiency increased, and gross margin has increased year-on-year. In the first half of 2023, the company's coal sector achieved revenue of 4.612 billion yuan, +10.74% year on year, operating costs of 1,951 billion yuan, -5.91% year on year, gross profit margin of 57.68%, +7.49 percentage points year on year. Judging from the production and sales situation, in the first half of 2023, the company produced 233.622 million tons of raw coal, +935,000 tons (+4.16%), and sold 23.1443 million tons of raw coal, +819,100 tons (+3.67%) over the previous year. The price of tons of coal was 199.25 yuan/ton, +7.31% year on year, and the cost of tons of coal was 84.31 yuan/ton, -8.83% year on year.
Electricity sector: The performance of the coal power sector has improved, and the increase in green power is gradually improving. In the first half of 2023, the power sector achieved overall revenue of 1,520 billion yuan (including coal power and new energy), +9.99% YoY, operating cost of 812 million yuan, +0.96% YoY, and gross margin of 46.54%, +4.78 percentage points year on year. During the reporting period, the company's actual power generation capacity was 4.451 billion kilowatt-hours (including photovoltaics and wind power), +9.0% year-on-year, and actual electricity sales volume was 4.169 billion kilowatt-hours, or +13.3% year-on-year. The cost reduction measures were very effective. The unit cost of electricity sold was 0.19 yuan/kilowatt hour, -10.89% year-on-year. By product, in the first half of 2023, the ① coal power sector achieved revenue of 1,011 billion yuan, +7.26% year on year; operating costs of 595 million yuan, -5.23% year on year; gross profit margin of 41.15%, +7.75 percentage points year on year. ② The new energy power generation sector achieved revenue of 509 million yuan, +15.85%; operating costs of 217 million yuan, +22.91%; gross profit margin of 57.26%, -2.45 percentage points year on year.
Electrolytic aluminum sector: The decline in aluminum prices is dragging down the sector, and the cost of tons of aluminum remains stable. In the first half of 2023, the electrolytic aluminum sector achieved revenue of 7.078 billion yuan, -12.37% year on year; operating cost of 5.889 billion yuan, +0.36% year on year; gross profit margin of 16.80%, -10.55 percentage points year on year. During the reporting period, the company actually produced 429,200 tons of electrolytic aluminum, -0.15%, and actually sold 430,700 tons of electrolytic aluminum, +0.01% yoy. The price of electrolytic aluminum products was 16434.09 yuan/ton, -12.37%, and the unit cost was 13673.72 yuan/ton, or -0.27%. The pressure on sector performance is mainly due to a decrease in the overall sales price of aluminum products, but the company's costs have maintained a good level and remain sufficiently competitive.
The new energy landscape is growing, and the projects are diverse and far-reaching. In the first half of 2023, the company invested 4.234 billion yuan, +371.5% year-on-year. The investment focused on the goal of “doubling green efficiency” and mainly went to new energy projects (photovoltaics, wind power), accounting for more than 99% of the investment. New energy investment projects are progressing steadily. According to the company's disclosure, grid-connected new energy projects are expected to reach at least 300 GW in 2023. Specific projects include: Bieligutai 500MW wind power project, Alashan base 400MW wind power project, Inner Mongolia Huomei Hongjun pilot 300MW wind power project, and Tongliao Qingge'er New Energy Co., Ltd.'s 1 million kilowatt wind power delivery project. The sector is poised to release future performance.
Investment strategy: The company's coal-electricity-aluminum industry integration is the core of operation, and the operation is relatively steady. At the same time, the company is working hard to expand the new energy sector and build an energy matrix, which is of positive significance in deepening the moat and stabilizing the company's profitability. Based on this, we adjusted our profit forecast. We expect the company's net profit to be 41.99/43.36/4.618 billion yuan in 2023-2025, +5.3%/+3.3%/6.5% over the same period. The corresponding EPS is 1.87/1.93/2.06 yuan, corresponding to the closing price PE on August 25, 6.9/6.7/6.3 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: macroeconomic fluctuations, large fluctuations in company product prices, new energy installations falling short of expectations, changes in environmental protection and safety supervision policies, etc.