Incident: On the evening of August 30, Guangdong Electric Power A released its 2023 semi-annual report results. In the first half of 2023, the company achieved operating income of 28.341 billion yuan, up 25.34% year on year; achieved net profit of 857 million yuan, up 162.44% year on year; among them, achieved operating income of 15.295 billion yuan in a single second quarter, up 36.29% year on year, and 17.24% month on month; achieved net profit of 768 million yuan, up 182.94% year on year, and 772.73% month on year.
Comment:
By sector, thermal power profits have improved dramatically, and new energy profits have declined year-on-year. The coal power sector of 2023H1 achieved revenue of 20.838 billion yuan (up 7.70% year on year), gross profit margin of 7.70% (increase of 16.79 pcts), and net profit of 207 million yuan; gas and power sector 2023H1 achieved revenue of 5.404 billion yuan (up 56.13% year on year), gross profit margin of 12.27% (up 11.54 pct year on year), achieving net profit of 244 million yuan; the thermal power sector achieved a total net profit of 461 million yuan, a sharp increase of 123.52% over the previous year. At the same time, 2023H1's wind power sector achieved revenue of 1,535 million yuan (up 10.12% year on year) and a gross profit margin of 49.68% (down 9.28 pct.); the photovoltaic sector achieved revenue of 20 million yuan, gross profit margin of 70.83%, and the new energy sector 2023H1 achieved total net profit of 301 million yuan, down 6.81% year on year.
The cost of thermal power declined sharply while electricity prices remained high, helping the company turn losses into profits. 1) Cost side:
The company's long-term coal cooperation ratio is low, and imported coal accounts for a relatively high share. Benefiting from a sharp drop in domestic spot coal prices and imported coal prices since May, the company's fuel costs have improved significantly year-on-year since the second quarter. In the first half of 2023, the company achieved fuel costs of 0.392 yuan/kilowatt-hour for thermal power, a year-on-year decrease of 5.71%. We expect the cost of kW fuel for thermal power to decline further in the second half of the year. 2) Revenue side: The annual Changxie electricity price in Guangdong has almost risen sharply, and the monthly transaction price has remained high, driving the company's revenue to improve significantly. In the company's electricity sales structure, annual Changxie electricity accounts for about 70% of electricity sales, and monthly transactions such as purchasing electricity on behalf of electricity and spot transactions account for about 30%. The annual long-term cooperative average price of electricity can lock in the annual revenue of most of the thermal power sector. The average price of electricity sold by the company in the first half of 2023 was 591.86 yuan/kilowatt-hour (tax included, same below), an increase of 49.12 yuan/kilowatt-hour over the previous year, and a year-on-year increase of 9.05%.
Demand for electricity consumption is expected to continue to grow, and the company's electricity sales volume is steadily increasing. In the first half of 2023, the company achieved 53.481 billion kilowatt-hours of feed-in electricity, +15.36% over the same period last year. Among them, coal power was 42.146 billion kilowatt-hours, +13.13% year-on-year; 8.40 billion kilowatt-hours of gas and electricity, +28.73%; and 2,494 billion kilowatt-hours of wind power, +17.24%. Looking ahead to the second half of the year, post-epidemic economic recovery will help electricity consumption pick up, and the company's electricity sales volume is expected to continue to rise. Meanwhile, as the electricity load in Guangdong continues to increase, the Guangdong Energy Administration issued the “Guangdong Province's Implementation Plan for Promoting High-Quality Energy Development” in May, reducing the proportion of installed non-fossil energy power generation by 5 percentage points, and increasing the installed scale of coal power by more than 10 million kilowatts.
As one of the important energy and power enterprises in Guangdong Province, the company is also simultaneously increasing its coal and electric power projects.
Currently, the company is constructing 8 million kilowatts of coal power, which is expected to be gradually put into operation in 2024-2025; the scale of gas and electricity under construction is 5.456 million kilowatts, and it is expected to put into production about 5 million kilowatts this year.
There is plenty of room for green power to grow in the “14th Five-Year Plan” installation. According to the company's plan, the “14th Five-Year Plan” new energy installation growth space is expected to reach 14 million kilowatts. In terms of wind power, Guangdong's offshore wind resource endowment is relatively good. The company has already participated in the competitive allocation of offshore wind power projects in Guangdong Province. We believe that the company's offshore wind power installation is expected to accelerate before the province makes up for the decline. In terms of photovoltaics, the company's photovoltaic sector began to develop in the “14th Five-Year Plan”. Benefiting from the recent rapid decline in PV module prices, the company's PV installation scale is expected to accelerate. At the same time, significant improvements in the company's thermal power sector profits and cash flow will help the construction of green electric equipment.
Profit prediction and valuation: The three “volume and price” factors of the company's thermal power sector resonate, and profit improvement is expected to continue; the planned volume of the green power sector is considerable, and the collaborative development of Fire Green opens up room for growth. We maintain the company's net profit forecasts for 2023-2025 at 3,783 billion, 4.609 billion, and 5.217 billion respectively, with a year-on-year growth rate of 225.93%/21.85%/13.17%; PE corresponding to the closing price of 6.36 yuan on August 30 was 8.83/7.24/6.40 times, respectively, maintaining the “increase in holdings” rating.
Risk factors: domestic and foreign coal prices have risen sharply again; the pace of expansion and construction of the company's new energy projects falls short of expectations; the market-based reform of the Guangdong Electric Power Company falls short of expectations.