Event: Guangdong Electric Power A released its results for the third quarter of 2023 on the evening of October 30th. From the first to the third quarter of 2023, the company realized operating income of 45.175 billion yuan, up 14.41% from the same period last year, and realized net profit of 1.727 billion yuan, up 201.15% over the same period last year. Among them, the operating income in the third quarter alone was 16.834 billion yuan, down 0.24% from the same period last year, and an increase of 10.06% from the previous quarter. The net profit of returning to the mother was 870 million yuan, an increase of 353.14% over the same period last year and 13.28% month-on-month.

Comments:

Thermal power costs fell sharply while electricity prices remained high, helping the company to continue to repair its performance in the third quarter. 1) cost side: the proportion of the company's coal association is low, and the proportion of imported coal is relatively high. Benefiting from the sharp decline in domestic spot coal prices and overseas imported coal prices since May, the company's fuel costs improved significantly in the third quarter compared with the same period last month. The company's fuel cost for power generation in the first three quarters was 30.421 billion yuan, down 4.85% from the same period last year; the fuel cost for power generation in the third quarter alone was 10.627 billion yuan, down 22.93% from the same period last year. In the third quarter of 2023, the company realized thermal power fuel cost of 0.316 yuan per kilowatt hour, down 18.01% from the same period last year and 12.25% from the previous year. 2) Revenue side: the annual electricity price of Guangdong Changsha Association has almost gone up, and the monthly transaction price has remained relatively high, which has led to a significant improvement in the company's revenue. In the company's electricity sales structure, annual long Association electricity accounts for about 70% of electricity sales, and monthly transactions such as purchasing electricity and spot transactions account for about 30%.

The annual average price of electric power can lock in the annual income of most thermal power sectors. From the first to the third quarter of 2023, the average price of electricity sold by the company was 583.19 yuan per kilowatt-hour (including tax, the same below), up 40.25 yuan per kilowatt-hour from the same period last year, up 7.41 percent from the same period last year. The growth and decline of both ends of cost and income contributed to the continuous repair of the company's performance in the third quarter.

Electricity consumption demand is expected to continue to grow, and the company's electricity sales are increasing steadily. In the first three quarters of 2023, the company completed a total of 91.452 billion kilowatt-hours of electricity generated by the consolidated report, an increase of 6.47 percent over the same period last year. Of these, coal power completed 72.402 billion kilowatt hours, an increase of 2.47 percent over the same period last year, gas power completed 14.674 billion kilowatt hours, an increase of 28.30 percent, wind power completed 3.387 billion kilowatt hours, an increase of 13.59 percent, hydropower completed 297 million kilowatt hours, an increase of 1.02 percent over the same period last year, biomass completed 518 million kilowatt hours, a decrease of 1.33 percent, photovoltaic completed 174 million kilowatt hours, compared with 0 in the same period last year. Looking forward to the fourth quarter and next year, the economy is expected to continue to recover steadily, electricity consumption is expected to continue to grow, and company electricity sales are expected to continue to increase. At the same time, due to the continuous growth of Guangdong power load, in May, the Guangdong Provincial Energy Bureau issued the Guangdong Provincial implementation Plan for promoting High-quality Energy Development, reducing the proportion of non-fossil energy power generation by 5 percentage points, and increasing the installed capacity of coal power by more than 1000 kilowatts. As one of the important energy and power enterprises in Guangdong Province, the company also increases the size of coal-fired electric power projects at the same time. At present, the company is building 8 million kilowatts of coal power, and we expect to gradually put into production in 2024-2025; the scale of gas power under construction is 5.456 million kilowatts, and we expect to put into production about 5 million kilowatts this year.

Green Power has a broad space for growth during the 14th five-year Plan, and the growth of wind power contributes to the coordination of fire and green. According to the company's plan, the installed growth space of new energy during the 14th five-year Plan is expected to reach 1400 kilowatts. In terms of wind power, Guangdong has a better endowment of sea wind resources. In August, Guangdong Wind Power Co., Ltd., a wholly-owned subsidiary of the company, plans to increase its capital and shares by way of public listing, and we believe that the company's offshore wind power installation is expected to accelerate before the province compensates and retreats the slope. In terms of photovoltaic, the company's photovoltaic plate started from the beginning of the "14th five-year Plan". Thanks to the recent rapid decline in the price of photovoltaic modules, the company's photovoltaic installed scale is expected to accelerate.

At the same time, the substantial improvement in the profits and cash flow of the thermal power sector of the company may contribute to the construction of green power installation.

Profit forecast and valuation: the company's thermal power plate "volume-price cost" triple factor resonance, profit improvement is expected to continue; green power plate planning volume is considerable, fire-green coordinated development is expected to open up growth space. As the cost-end price of thermal power fuel fell less than expected, we lowered the company's homing net profit forecast for 2023-2025 to 2.67 billion, 3.885 billion and 5.056 billion, respectively, with a year-on-year growth rate of 188.88%, 45.50% and 30.14%. The PE corresponding to the closing price of 5.42 yuan on October 30 was 10.667.33 ppm 5.63 times, maintaining the "overweight" rating.

Risk factors: domestic and foreign coal prices have risen sharply again; the pace of expansion and construction of the company's new energy projects is not as expected; the market-oriented reform of Guangdong electric power is not as expected.