Main points of investment:
Event: the company released its third quarterly report for 2023, and its performance was in line with expectations. The company achieved income of 512 million in the first three quarters of 2023, yoy+48.24%, net profit of 21 million yuan, yoy+62.80%, deduction of non-parent net profit of 16 million yuan, yoy+80.76%. In a single quarter, the company's 2023Q3 realized income of 160 million yuan, yoy+21.32%, net profit of 8 million yuan, yoy+22.82%, deduction of non-parent net profit of 7 million yuan, yoy+41.44%. The company's performance is in line with expectations.
The electricity market is improving, and we are optimistic that the bidding for thermal power auxiliaries will speed up this year, driving the growth of the company's main business. Since last year, the approval of thermal power in China has accelerated obviously, and the power market has continued to improve. The company's main products, slag energy-saving and environmental protection treatment system and low-temperature flue gas waste heat deep recovery system are important thermal power auxiliary equipment, with the promotion of thermal power market construction, the company's auxiliary business is expected to gradually expand.
The trend of flexibility transformation business remains unchanged, and the promotion of electricity reform policy is expected to promote the gradual expansion of flexibility transformation. The full-load denitrification system developed by the company can meet the requirements of normal operation of the denitrification system under low load and deep peak regulation in thermal power plants, and it is an important part of flexible transformation. The Central Deep Reform Commission examined and approved the guidance on deepening Power system Reform and speeding up the Construction of a New Power system at the meeting of the Central Deep Reform Commission on July 11 this year. On October 25, the National Development and Reform Commission and the National Energy Administration issued the guidance on strengthening the Stability of Power system under the New situation, proposing that the regulation and support capacity of conventional power sources should be strengthened, the flexible manufacturing of all new coal power units should be realized, and the flexibility transformation of units in service should be changed. Superimposed by the decline in coal prices and the increase in the compliance rate of the long-term Association this year, the profits of thermal power enterprises are expected to improve significantly, further boosting the enthusiasm for flexible transformation, and we believe that the company's flexible transformation business will be realized step by step.
The company 104 million won the bid for Shougang steel slag utilization equipment, the first hydrogen energy (20MW) business landed, superimposed previous desulfurization wastewater to achieve a breakthrough, the company is expected to open the company's second growth curve. On June 20, the company announced that the wholly-owned subsidiary Qingda Energy Saving Engineering Research Institute (Qingdao) Co., Ltd. and Beijing Shougang Construction Group Co., Ltd. signed a contract for the purchase of comprehensive utilization equipment for the industrialization of steel slag with a contract amount of 104 million yuan. In September this year, the company signed a cooperation agreement to invest in supporting hydrogen production projects, with an investment of 549 million yuan. The project covers a total area of 1800 mu and adopts the fishing-light complementary mode. The proposed construction scale is the AC side installed capacity 90MW, equipped with 20MW hydrogen production equipment, and is scheduled to be completed before December 15, 24, and the full capacity will be connected to the grid. In addition, the zero discharge technology of desulphurization wastewater developed by the company also achieved a breakthrough last year, with an income of 14 million yuan. We believe that the company's product structure has been gradually improved, and with the gradual opening of the market for new products, the company is expected to gradually open the second growth curve.
Investment analysis opinion: we continue to be optimistic about the main logic of the gradual expansion of thermal power investment acceleration and flexibility transformation, maintaining the company's 2023-25 return net profit of 1.05 yuan 1.40 trillion yuan, corresponding to PE times that of 20-15-12, and maintaining the "buy" rating.
Risk hint: the new installed scale of thermal power plant is not as large as expected, and the flexible transformation progress is not as good as expected risk.