The Korean gas project performed brilliantly. The company 23H1 achieved revenue of $1,224 million, +7.9% year over year, net profit to mother of $198 million, +11.2% year over year, and earnings per share of $0.0461. Revenue growth in the first half of the year was mainly due to: (1) benefiting from rising electricity prices for gas projects in South Korea, which increased 14.6% year-on-year to US$678 million, making it the segment that contributed the most to mid-term revenue growth; (2) China's wind power projects benefited from an increase in new installed capacity, and revenue increased 5.5% year-on-year to US$365 million. Net profit attributable to mother during the period increased 11.2% year over year to US$198 million, mainly due to: (1) falling fuel costs for the Korean project, which drove the net profit from the Korean project to a year-on-year increase of 43.6% to US$42 million; (2) amortization of associated companies' performance turned a loss of US$7.81 million into a profit of US$4.15 million in the same period last year. The Korea Gas Project remains the business segment that contributed the most to 23H1's revenue and net profit growth.
Wind power generation is growing rapidly. As of June 30, 2023, the company's power generation capacity increased 6.6% year over year to 10,140.6 GWh. The increase in power generation was mainly due to the contribution of new wind power projects. The company's wind power generation increased 16.7% year-on-year to 5,601.1 GWh during the period. The amount of electricity generated by the Korean project was basically the same as in the same period last year. In terms of electricity prices, 23H1 China's weighted average electricity prices (including VAT) were 0.57, 0.64, 0.50, 0.47, and 0.27 yuan/kWh, respectively. Due to lower feed-in tariffs for new wind power and photovoltaic projects, electricity prices for wind power and solar projects fell 0.02 yuan/kWh during the period compared to the same period last year.
The installed scale remains stable. As of June 30, 2023, the company's total equity installed capacity was 8.98 GW, the same as the installed capacity at the end of 2022. Among them, clean and renewable energy projects accounted for 82.6% of the installed capacity, traditional energy project equity accounted for 17.4%, and the share of China and South Korea project equity installed capacity was 75.9% and 24.1% respectively. Although 23H1's new grid-connected installed capacity falls short of expectations, we expect that the company's new installed capacity for wind power and solar energy may continue to grow steadily at a scale of around 500-1000 MW.
Profit forecast and valuation: We expect the company to achieve operating income of US$25.55/26.92/28.39 billion and net profit to mother of US$334/3.60/372 million from 2023 to 2025, corresponding earnings per share of US$0.08/0.08/0.09, respectively. The price-earnings ratios corresponding to the current stock price are 3.5/3.3/3.2 X, respectively. Maintaining a “buy” investment rating, the company's target price is HK$3.8, corresponding to PE 6.1 X in 2024.
Risk warning: Installed capacity growth of new energy sources such as wind power and solar energy fell short of expectations; the Group's integration of new energy assets fell short of expectations; fuel costs rose beyond expectations.