Incidents:
The company announced its three-quarter report for 2023. In the first three quarters, it achieved operating income of 44.77 billion yuan, an increase of 10.41% over the previous year, net profit of 2,912 billion yuan, an increase of 16.47% over the previous year, and net profit of 2,689 billion yuan after deducting non-return net profit of 2,689 billion yuan, an increase of 25.96% over the previous year. The third quarter achieved operating income of 14.851 billion yuan, an increase of 17.51% over the previous year, net profit of 910 million yuan, an increase of 25.32% over the previous year, and net profit of 870 million yuan after deducting non-return net profit of 870 million yuan, an increase of 24.86% over the previous year. The performance was in line with expectations.
Key points of investment:
Gross margin continued to improve, and the expense ratio increased in the third quarter. The company's overall gross margin for the first three quarters was 17.40%, +1.17pct year-on-year, of which the gross profit margin for the third quarter was 17.35%, year-on-year +1.53pct, a record high since 2019. The increase in the share of thermal power revenue further improved the overall gross margin level and strengthened the company's profitability. The sales/management/R&D/finance expense ratio for the third quarter was 2.56%/5.49%/4.35%/0.25%, up 0.44pct/0.74pct/0.16pct/0.53pct, respectively. The overall cost rate was 12.64%, up 1.87 pct year on year, and the slight increase in the cost ratio affected the company's further profit performance.
Orders in the traditional power supply sector continue to increase dramatically, and there is strong certainty that the performance will increase in the next 2 to 3 years. According to the company announcement, the company achieved new efficiency orders of 56.368 billion yuan from January to August 2023 (53.822 billion yuan in the first three quarters of 2022). Among them, new efficiency orders from January to August 2023 in the clean and efficient energy equipment sector increased by more than 35% compared to the first three quarters of 2022.
Coal, gas, and nuclear power have all been approved for construction on a large scale in the past two years. Subsequent company orders are expected to continue to grow at a high rate, and there is a high degree of certainty about high performance growth in the next 2 to 3 years.
Pumped storage is expected to enter the peak bidding period, effectively supporting the company's long-term performance. Pumped storage construction has also entered a peak period. According to the “Pumped Storage Industry Development Report 2022", in 2022, China approved 48 new savings projects, with a total approval volume of 68.9 GW. This is the year with the largest approval scale in China over the years. The annual approval scale exceeds the sum of the installed capacity put into production in the previous 50 years, and has brought the number of pumping equipment under construction in China to more than 120 GW. Bidding for pumped storage equipment is expected to enter a peak period. The company's market share in the field of pumping mechanical and electrical equipment is stable in the top two, and large-scale savings construction effectively supports the company's long-term performance.
Investment analysis opinion: Future demand for traditional power supplies will essentially be driven by continued load growth and power structural adjustments. The fundamentals of the industry are clearly superior to those before double carbon, and the competitive landscape is stable. Maintaining the previous profit forecast, the company's net profit from 2023-2025 is estimated to be 38.6, 53.1 billion yuan, and 6.14 billion yuan respectively. The current stock price corresponding to PE is 12, 9, and 8 times, respectively, maintaining the “buy” rating.
Risk warning: The progress of the power system reform fell short of expectations, and the increase in electricity demand fell short of expectations