1H23's net profit was -22% year over year, profit forecast and target price were slightly lowered. Zhongmin Energy released results. 1H23 achieved revenue of 831 million yuan (-10% YoY), net profit of 326 million yuan (-22% YoY), net profit of 314 million yuan (-22% YoY), net profit of 314 million yuan (-25% YoY). 2Q23 achieved revenue of 277 million yuan (-26% year on year, -50% month on month) and net profit of 53 million yuan (-60% year on year, -81% month on month). Poor wind resources in Fujian led to a year-on-year decline in power generation and performance. The two major high-quality assets owned by the majority shareholders (Pinghai Offshore Wind Power Phase III and Yongtai Pumping) are expected to meet the prerequisites for asset injection, win new bids for offshore wind power projects, and drive the company's medium- to long-term performance growth. Lower the forecast for wind power hours and slightly lower the profit forecast. We expect the company's net profit to be 83/88/940 million yuan (previous value: 84/90/950 million yuan), corresponding to EPS of 0.43/0.46/0.49 yuan (previous value: 0.44/0.47/0.50 yuan). The comparable company Wind unanimously expected an average PE value of 14x in '23, giving the company 14xPE in '23, with a target price of 6.02 yuan (the previous value of 6.16 yuan was based on 14xPE in '23), maintaining the “buy” rating.
1H23 Fujian wind resources are poor, and the internal engine has not changed in the short term
As of the end of June '23, the total installed capacity of the company connected to the grid was 957,300 kilowatts, with no new installations in the first half of the year; of these, 611,300 kilowatts of onshore wind power and 296,000 kilowatts of offshore wind power. 1H23 Fujian offshore wind power net profit is -12%, Fujian onshore wind power net profit is -34%, and Heilongjiang wind power net profit is -16%. The size of incoming wind is the core variable affecting the company's performance. 1H23's onshore/offshore wind power utilization hours in Fujian were 1,390/1,885 hours (-16%/-8%), respectively; the company's wind power utilization hours in Heilongjiang were 1,281 hours (+2% YoY); the number of hours used by the company's wind power projects was better than the average domestic wind power average of 1,237 hours (+7% YoY).
Pinghai Bay Phase III is awaiting the start of the injection process. Yongtai Extraction is expected to meet the injection conditions. The majority shareholder Fujian Investment Group promised during the major asset restructuring of Zhongmin Energy in 2019. The prerequisites for starting asset injection for related assets under the group include: 1) stable operation; 2) achieving profit within a full fiscal year; 3) no compliance issues. The Group's Pinghai Bay Offshore Wind Power Phase III project was put into operation at the end of the 21st and has met the above prerequisites. The Group's Yongtai pumping project has installed 4 units with a total of 1.2 GW. It was put into full capacity power generation on March 28. We expect the injection conditions to be met in 24 years.
The majority shareholders won the bid for the second batch of offshore wind power distribution in Fujian. The company's location advantage is still in Fujian's “14th Five-Year Plan” plan to add 4.1 GW of offshore wind power to the grid and develop 10.3 GW. In July, the investment group won the bid for 0.95GW of the 2023 offshore wind power competition project in Fujian Province, with a bid share of 47.5%, demonstrating its location advantage. Zhongmin Energy seized the opportunity of Fujian Province's counterpart aid to Tibet, obtained 700,000 kilowatt photovoltaic projects in the upper reaches of the Jinsha River through competition, and achieved a breakthrough in independent development projects.
Risk warning: construction of new projects is lagging behind; subsidy verification results are lower than expected; new project acquisition falls short of expectations.