Event description

The company released the third quarterly report of 2023: in the third quarter of 2023, the company realized operating income of RMB 2.702 billion yuan, with a year-on-year decrease of 11.01%; net profit attributable to parent company was RMB 306 million yuan, with a year-on-year growth of 83.52%.

Event comment

Self-generated electricity is significantly repaired, revenue is under pressure or non-electricity business. With the gradual abundance of incoming water, hydropower stations affiliated to the Company and its holding companies completed power generation of 1.06057 billion kWh in the third quarter, an increase of 141.75% year-on-year; on-grid electricity was 1.04956 billion kWh, an increase of 141.66% year-on-year. In addition to the excellent performance of self-generated electricity, the company's demand for electricity in the network has also expanded steadily, with electricity sales of 3.673 billion kWh completed in the third quarter, up 1.79% year-on-year. The average price of electricity sales in the third quarter of the company was 0.4951 yuan/kWh, although it decreased by 2.13% year-on-year, but increased by 2.15% compared with the second quarter. The main reason for the year-on-year decline was the high electricity price caused by the tight power supply and demand in the same period last year. Overall, although the electricity sales price has decreased, but the electricity volume has increased year-on-year, so the revenue of the company's main business in the third quarter may remain stable year-on-year. However, the company realized operating income of 2.702 billion yuan in the third quarter, a year-on-year decrease of 11.01%. The main reason for the pressure on the company's revenue was due to the continuous decline in the price of electrolytic manganese, which led to the impact of pressure on the operation of non-electric businesses such as electrolytic manganese in the third quarter.

Gross profit increased significantly and performance continued to recover. In the third quarter, thanks to the year-on-year substantial growth of self-generated electricity, the company's electricity sales structure was optimized. The gross profit rate of the company continued the upward trend in the second quarter, reaching 17.72%, with a month-on-month growth of 6.07 percentage points and a year-on-year growth of 11.07 percentage points. The gross profit of the company in the third quarter was restored to 479 million yuan, with a year-on-year growth of 136.88%. In the third quarter, the company realized an investment income of RMB 32 million yuan, a year-on-year decrease of 64.43%, which limited the company's performance growth to a certain extent, but it has been turned from negative to positive in month-on-month view. On the whole, driven by the rapid growth of spontaneous electricity, the company realized a net profit of 306 million yuan in the third quarter, with a year-on-year growth of 83.52%.

Shareholder holdings demonstrate confidence, endogenous growth to expand new space. On September 27, the Company successively disclosed the plan to repurchase equity with its own funds and the plan of controlling shareholder Changjiang Power to increase the equity of the Company, demonstrating the confidence of management and controlling shareholders in the long-term development of the Company. In addition, in the first half of 2023, the Company has made breakthroughs in many businesses, which is expected to become a new profit growth point of the Company: 1) Chongqing Liangjiang Longxing Ganfeng Energy Station Project with an investment of RMB 660 million has obtained preliminary approval procedures; further strengthen cooperation with Angang Group Co., Ltd., jointly establish a clean energy development joint venture company with Angang Group Co., Ltd., further strengthen cooperation between both parties, and continuously expand the application scenario of "high-quality and large users" of comprehensive energy business; 2) Breakthrough has been made in the energy storage business at the user side in Guangdong and other places. Up to now, 28 projects have been completed and put into operation with a total capacity of 50MWh. On the other hand, Songhe and Longsheng Independent Energy Storage Power Station Projects in Yongchuan District and Liangjiang New Area, with a total investment of RMB 1.182 billion Yuan and a total installed capacity of 300MW/600MWh, have been officially put into operation at the beginning of August with full capacity, and are expected to contribute to the performance increment for the sixth time. 3) Gradually explore and clarify the integrated business model and operation system of "replacement and storage" of electric heavy trucks. Up to now, 27 decision-making projects have been completed, with an investment of more than 600 million yuan. Under the background of breakthroughs in many businesses, the Company may enter into a period of rapid development, and the development space of the Company during the 14th Five-Year Plan is worth looking forward to.

Investment suggestion: According to the latest financial data, we adjust the company's profit forecast. It is estimated that the EPS of the company from 2023 to 2025 will be 0.30 yuan, 0.44 yuan and 0.55 yuan, and the corresponding PE will be 26.08 times, 17.58 times and 14.02 times respectively, maintaining the "buy" rating.

Risk hint

1. The incoming water is less than the expected risk.

2. The risk of project expansion is lower than expected.