Summary of events: on October 27, the company released the third-quarter report of 2023, with operating income of 69.506 billion yuan in the first three quarters, an increase of 14.2% over the same period last year (restated), and net profit of 5.962 billion yuan, an increase of 1217.3% over the same period last year (restated). Deduction of non-return net profit of 5.662 billion yuan, an increase of 2461.4% over the same period last year (restated). In the third quarter, the company achieved operating income of 27.777 billion yuan, an increase of 11.3% over the same period last year (restated); net profit of 3.184 billion yuan, an increase of 5459.9% over the same period last year (restated); and net profit of 3.04 billion yuan, an increase of 6511.9% over the same period last year (restated).
Q3 performance continued to improve: 3Q23's electricity consumption in Zhejiang Province increased by 8.0% to 187.5 billion kWh compared with the same period last year. Despite the strong demand, due to external power squeeze, the company completed 45.816 billion kWh power generation in a single quarter, down 5.6% from the same period last year and an increase of 8.4% from the previous year. We estimate that the average online electricity price of Q3 is about 0.441 yuan / kWh, an increase of 0.6% over the same period last year and 0.9% from the previous year. Excluding the revenue and cost of shares in the consolidated table, Q3 achieved revenue of 23.798 billion yuan, down 4.7% from the same period last year, lower than the decline in electricity consumption; benefited from the decline in coal prices since the beginning of the year, achieving a gross profit of 3.718 billion yuan, an increase of 3.715 billion yuan over the same period last year; gross profit margin increased by 15.6% to 15.6%, an increase of 8.4% from a month earlier, and Q3's profit continued to improve in a single quarter.
Investment income thickening performance: Q3 company achieved a net investment income of 1.392 billion yuan, an increase of 613 million yuan over the same period last year, an increase of 78.6%. Taking into account the stable performance of equity participation in nuclear power, the investment income rose significantly or repaired due to the performance of thermal power assets.
Zhonglai's performance is improving, and industrial coordination is becoming more and more obvious: Q3 achieved revenue of 3.98 billion yuan, an increase of 33.3% over the same period last year, a single-quarter gross profit of 3.6% to 19.5%, and a net profit of 247 million yuan, an increase of 135 million yuan over the same period last year, an increase of 120.3%. After joining the owner, the company breaks the shackles of new energy development through private equity and Zhonglai, and the follow-up synergy effect of the industrial chain is worth looking forward to.
Investment suggestion: although the electricity of Q3 company has decreased slightly, it has benefited from the improvement of fuel cost and the full release of high flexibility in performance; the investment income of participating in thermal power has been greatly improved and its performance has been further thickened. According to the changes of electricity, electricity price and fuel cost, the profit forecast of the company is adjusted. It is estimated that the annual EPS on 23-24-25 will be 0.49max 0.53 pound 0.56 yuan (the previous value is 0.42 pm 0.46 shock 0.48 yuan), corresponding to the closing price PE on October 27, which is 8.0 times that of 9.2 max. With reference to the company's historical valuation, the company was given 12.0 times PE in 2023 with a target price of 5.88 yuan per share, maintaining a "cautious recommendation" rating.
Risk hints: 1) macroeconomic pressure to reduce electricity demand; 2) rising fuel prices to increase operating costs; 3) electricity market competition to reduce grid electricity prices; 4) supply structure adjustment to suppress unit output.