Core views

In the first three quarters of 2023, the company achieved operating income of 6.097 billion yuan, a year-on-year decrease of 29.25%; net profit was 1,137 billion yuan, a year-on-year decrease of 64.66%. The company's revenue and profit declined year-on-year, mainly due to poor incoming water conditions in the watersheds where the company's power plants are located, and the year-on-year decrease in hydropower generation capacity. In the first three quarters of 2023, the company completed power generation capacity of 21,862 billion kilowatt-hours, a year-on-year decrease of 36.03%. Among them, hydropower, thermal power, wind power, and photovoltaics completed power generation capacity of 16.684 billion kilowatt-hours, 3.459 billion kilowatt-hours, 1.35 billion kilowatt-hours, and 369 million kilowatt-hours, respectively, with year-on-year changes of -45.83%, +75.23%, +5.39%, and +192.86%.

The company's hydropower generation capacity declined sharply year on year, mainly due to the fact that incoming water from the Hongshui River Basin where the company is located in the first three quarters was 4-5 percent lower than the average over many years; photovoltaic power generation achieved a year-on-year increase, mainly due to the year-on-year increase in the company's PV installed capacity. We believe that the high quality of the company's hydropower assets, along with the improvement of incoming water in the basin where it is located, compounded by the continuous increase in the installed capacity of Xinyuan, the company's performance is expected to continue to grow.

occurrences

The company released its report for the third quarter of 2023

In the first three quarters of 2023, the company achieved operating income of 6.097 billion yuan, a year-on-year decrease of 29.25%; net profit of 1,137 billion yuan, a year-on-year decrease of 64.66%; net profit after deducting non-refunded net profit of 1,150 billion yuan, a year-on-year decrease of 64.37%; weighted average return on net assets of 6.43%, a year-on-year decrease of 13.33%; and basic earnings per share of 0.1365 yuan/share, a year-on-year decrease of 65.88%.

Brief review

Incoming water from hydropower was weak year over year, and revenue performance declined year over year

In the first three quarters of 2023, the company achieved operating income of 6.097 billion yuan, a year-on-year decrease of 29.25%, and net profit of 1,137 billion yuan, a year-on-year decrease of 64.66%. In the first three quarters of 2023, the company's revenue and profit declined year-on-year, mainly due to poor incoming water conditions in the watersheds where the company's power plants are located, and a year-on-year decrease in hydropower generation capacity. Looking at the third quarter alone, the company achieved operating income of 1,942 million yuan, a year-on-year decrease of 35.23%, and realized net profit of 224 million yuan, a year-on-year decrease of 82.96%. In the first three quarters of 2023, corporate management fees and financial rates were 5.86% and 10.09%, respectively, down 0.58 and 5.1 percentage points from the previous year.

In the first three quarters of 2023, the net cash flow from the company's operating activities fell from 5.979 billion yuan to 3,253 billion yuan, a year-on-year decrease of 45.60%; mainly due to a decrease in revenue, a decrease in cash electricity bills received, combined with an increase in the amount of thermal power, and an increase in the cost of paid fuel due to an increase in the volume of thermal power.

The installed capacity of new energy continues to grow, and the amount of hydropower generation decreases year on year.

As of September 30, 2023, the installed capacity of the company reached 127.14,600 kilowatts, of which hydropower, thermal power, wind power, and photovoltaic installations were 10.2354 million kilowatts, 13.33 million kilowatts, 766 million kilowatts, and 383,200 kilowatts, accounting for 80.50%, 10.46%, 6.02%, and 3.01%, respectively. The total installed capacity of the company's new energy was 1,1492 million kilowatts, an increase of 16.85% over the previous year. In the first three quarters of 2023, the company completed power generation capacity of 21,862 billion kilowatt-hours, a year-on-year decrease of 36.03%.

Among them, hydropower, thermal power, wind power, and photovoltaics completed power generation capacity of 16.684 billion kilowatt-hours, 3.459 billion kilowatt-hours, 1.35 billion kilowatt-hours, and 369 million kilowatt-hours, respectively, with year-on-year changes of -45.83%, +75.23%, +5.39%, and +192.86%. The company's hydropower generation capacity declined sharply year on year, mainly due to the fact that incoming water from the Hongshui River Basin where the company is located in the first three quarters was 4-5 percent lower than the average over many years; photovoltaic power generation achieved a year-on-year increase, mainly due to the year-on-year increase in the company's PV installed capacity.

Looking at the third quarter alone, hydropower, thermal power, wind power, and photovoltaics achieved power generation capacity of 53.52, 12.87, 3.41, and 369 million kilowatt-hours, respectively, with year-on-year changes of -45.98%, +47.25%, +12.54%, and +192.86%.

Continue to strengthen Xinyuan's transformation and maintain the “buy” rating.

The company vigorously promoted infrastructure investment and construction for new energy projects. The cash flow from investment activities in the first three quarters was 2,328 billion yuan, an increase of 18.57% over the previous year. In the second half of 2023, the company's photovoltaic power plants such as Sinsongpo Photovoltaics, Daliping Photovoltaics, and Xiaowan Photovoltaic Power Station will gradually begin operation. The planned installed capacity is 120,000 kilowatts, 900,000 kilowatts, and 40,000 kilowatts, respectively. Recently, the company also plans to invest in the construction of the Guangxi Laibinduman Nongguang Complementary Photovoltaic Power Generation Project. The installed capacity is 36 MW, and the internal rate of return (before tax) of the entire investment in the project exceeds 7%. During the “14th Five-Year Plan” period, the company plans to gradually begin construction of the Lanshang Tibet section. This section plans to have 8 cascading hydropower stations with a total installed capacity of 9.618 million kilowatts, and plans to install 10 million kilowatts of photovoltaics. We believe that the high quality of the company's hydropower assets, along with the improvement of incoming water in the watershed where it is located, compounded by the continuous increase in the installed capacity of Xinyuan, is expected to continue to grow in operating performance. Net profit from 2023 to 2025 is estimated to be 1,464 billion yuan, 2,992 billion yuan, and 3.493 billion yuan respectively, corresponding to EPS of 0.19, 0.38 and 0.44 yuan/share, maintaining the “buy” rating.

Risk analysis

Power policy risks: Currently, all thermal power in Guangxi has entered the market, some photovoltaics and wind power have entered the market, and hydropower in Sichuan and Yunnan has also been basically marketed. Spot trading in the five southern provinces is being actively promoted, and policy fluctuations will cause the company's profit level to fluctuate somewhat.

Climate risk: As of the end of 2022, the company's non-petrochemical installed capacity accounted for 89.39% of the company's active installed capacity, leading in power generation. Incoming water from hydropower basins is greatly affected by climate change, and wind power and photovoltaics are also greatly affected by the local climate. The company's active new energy and hydropower units are distributed in different watersheds in Guangxi, Sichuan, Guizhou, Hubei, Yunnan and other provinces and regions. The geographical locations vary greatly. Climate change and instability in incoming water, wind, and light will have an impact on the company's power generation capacity.

Risk of coal price fluctuations: The company's only thermal power plant, Heshan Power Plant, has an active installed capacity of 1.33 million kilowatts, accounting for 10.60% of the company's active installed capacity. Fluctuations in coal prices have an impact on thermal power efficiency.

Demand risk: As marketization deepens, electricity prices will fluctuate due to this, which in turn will have an impact on enterprise efficiency.