Thermal power has turned losses into profits, and the performance of new energy has grown rapidly. The company's 23H1 realized revenue of 21.317 billion yuan (year-on-year + 4.98%), and the net profit attributed to the ordinary shareholder owner of the parent company was 1.68 billion yuan (year-on-year + 114.36%). The substantial increase in the company's medium-term net profit is mainly due to: (1) benefiting from the decline in current coal prices and the disposal of the company's coal power assets last year, fuel costs fell by 17.27% to 8.474 billion yuan compared with the same period last year. The net profit of the thermal power sector changed from a loss of 1.096 billion yuan in the same period last year to a profit of 562 million yuan, making it the business segment that made the greatest contribution to the growth of net profit. (2) the revenue and net profit of 23H1 wind power sector increased by 63.31% and 69.70% respectively compared with the same period last year, while the revenue and net profit of photovoltaic sector increased by 25.56% and 21.69% respectively. It shows that the company has made great efforts to transform and develop wind power and photovoltaic clean energy business in recent years to achieve remarkable results.
The installed proportion of clean energy has reached 66.4%. By the end of the 23H1 period, the company's consolidated installed capacity 32.94GW, which increased by 0.8x1.6 GW compared with the same period and month-on-month, respectively, of which clean energy installed capacity 21.86GW accounted for about 66.4% of the company's combined installed capacity, an increase of 15.6% over the same period last year. It is expected that by the end of 25, the proportion of clean energy installed in the company will reach 90%, and the proportion of revenue will exceed 70%.
Hydropower business is expected to improve significantly. The water supply of 23H1 is dry, and the national hydropower generation capacity decreased by 22.9% compared with the same period last year. The company's hydropower business power generation and revenue decreased by 56.2% and 55.97% respectively compared with the same period last year. Hydropower has become a major drag on the company's performance in the first half of the year. We expect that with the improvement of water supply in 23H2, the company's hydropower business is expected to rise in both volume and price.
The asset structure has been continuously optimized. China Power holding parent company, State Power Investment Group, has become the largest clean energy power company in the world, with a total installed capacity of 56.65 GW for wind power, 44.32 GW for solar power and 24.63 GW for hydropower. The group's huge clean energy assets will provide continuous driving force for the company's epitaxial growth. In July 2023, the company announced that it would acquire the group 9.27GW clean energy power generation project. After the completion of the acquisition, the company's clean energy installed capacity will increase by about 6.9 percent.
Profit forecast and valuation: it is estimated that by the end of 23, the company's combined installed capacity will reach about 45.19 GW, of which clean energy will reach 34.11 GW (wind power and photovoltaic about 27.4 GW), and clean energy will account for more than 75%. We estimate that the company's 25-year operating income is divided into 462.28 yuan 533.83 / 62.707 billion yuan, an increase of 5.81% / 15.48% / 17.47% over the same period last year; the company's net profit belonging to common shareholders is 41.35 / 63.51 / 8.27 billion yuan, an increase of 56.14% / 53.6%, 30.23%; earnings per share are 0.33 / 0.51 / 0.67 yuan, respectively. Maintain the "buy" investment rating and maintain the target price of HK $5.50, corresponding to PE 10X in 2024.
Risk tips: feed-in electricity prices fell more than expected; new energy installed less than expected; coal prices rose more than expected.