Description of the event
The company released its semi-annual report for 2023: in the first half of the year, it 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 (after retroactive adjustment). Among them, revenue for the single second quarter was 6.365 billion yuan, -1.3% year-on-year (after retroactive adjustment), -7.0% month-on-month; net profit for the single second quarter was 966 million yuan, +17.5% year-on-year (after retroactive adjustment), and -40.3% from the previous quarter.
Incident comments
The month-on-month decline in Q2 performance is in line with seasonal characteristics. Since the company's regular coal mining operations have few earthworks stripping in winter and earthwork in spring, summer, and fall, the Q1 performance is often the highest point throughout the year. The 2020/2021/2022 Q2 performance was -56%/-19%/-46%, respectively. The current decline in Q2 performance is in line with seasonal characteristics.
Coal: The price of coal bucked the trend, and the increase in volume and cost was the icing on the cake. The company's annual long-term cooperation ratio was as high as 90%. In the fourth quarter of 2022, due to the rise in the NCEI price index and changes in sales strategy, the company began a simultaneous increase in annual long-term cooperation prices in the fourth quarter, making the price of long-term cooperation in the first half of 2023 higher than in the same period last year. 2023H1 Company's coal production/sales volume is 2336/23.14 million tons, +4.2%/+3.7%; tonnes of coal revenue is 192 yuan/ton, +5.9%; tonnes of coal cost is 85 yuan/ton, -4.9% yoy; gross profit per ton of coal is 107 yuan/ton, +17%, gross profit margin is 56%, +5pct year on year.
Electricity: The installed capacity of new energy has exceeded 3 GW, and the profit contribution continues to increase. 2023H1's electricity distribution/sales volume (including photovoltaics and wind power) was 445/4.17 billion kilowatt-hours, +9.0%/+13.3% year-on-year; gross profit from the power business was 690 million yuan, +22.2%, of which thermal power and new energy gross profit accounted for 60% and 40% respectively. By the end of June 2023, the company had put into operation 3.12 million kilowatts of new energy, an increase of 950,000 kilowatts over the end of 2022.
Electrolytic aluminum: The decline in aluminum prices weakens profits. The production and sales volume of 2023H1 electrolytic aluminum was basically the same year on year; the price of tons of aluminum was 1,6129 yuan/ton, -13.9%; the cost of tons of aluminum was 13,419 yuan/ton, -1.7%; gross profit per ton of aluminum was 2,710 yuan/ton, -46.7%, gross profit margin of 17%, year-on-year -10 pct.
The annual results benefited from the price increase of the Changxie Association, and confidence in long-term development was highlighted. Looking at the whole year, the effect of the company's coal price increase is expected to continue until the second half of the year, with worry-free annual performance growth; at the same time, the company's installed capacity of new energy is expected to be close to 5 million kilowatts by the end of the year. This year, grid-connected new energy projects include the Ximeng Abagagaqi Beligutai 500MW wind power project, China Power Investment Corporation Shanghai Miao-Shandong UHV transmission channel Alashan base 400MW wind power project, Inner Mongolia Huomei Hongjun Electric Power Branch's thermal power flexibility transformation to promote market-based consumption of new energy. 1 million kilowatts New energy projects, such as wind power delivery projects, require an internal return on capital of at least 8%, and the second growth curve has been steadily extended. In the long run, in terms of new energy, the company's new energy installation target was expanded from 7 million kilowatts to 10 million kilowatts at the end of the “14th Five-Year Plan”, fully demonstrating its ambition for transformation and development; in terms of electrolytic aluminum, with the end of the overseas interest rate hike cycle, basic expectations for electrolytic aluminum are improving, the long-term supply and demand pattern of the industry remains tight, and price and profit resilience still exist. Overall, we are optimistic about the company's performance in 2023 and future long-term development prospects.
Investment recommendations and valuation: The company's EPS for 2023-2025 is expected to be 1.98 yuan, 2.28 yuan, and 2.43 yuan, corresponding to the closing price PE on August 25, 2023, 6.58 times, 5.69 times, and 5.35 times, respectively, maintaining the company's “buy” rating.
Risk warning
1. Operational risks of new energy projects;
2. Under the influence of external factors, there is a risk of unseasonal decline in coal prices or the coal sector.