Event: Guangdong Electric Power A released its 2023 three-quarter report. 2023Q1-Q3 achieved a total operating income of 45.175 billion yuan, +14.41% year-on-year, and net profit of 1,727 billion yuan, +201.15% year-on-year. In 2023Q3 alone, the company achieved operating income of 16.834 billion yuan, -0.24% year-on-year, net profit of 870 million yuan, turning a year-on-year loss into a profit. Net operating cash flow increased to 4.309 billion yuan in a single quarter. In addition, the company carried out asset impairment charges of about 424 million yuan this quarter. Based on business data, our comments are as follows:
Thermal power: The decline in 2023Q3 load brought about -11.2% of coal power feed-in capacity and -18.27% year-on-year in operating costs in a single quarter. Significant impairment of thermal power assets undermined performance. The total feed-in capacity of 2023Q1-Q3 companies was 86.456 billion kilowatts, +6.68% year-on-year, of which coal power and gas power were 679.00 and 14.384 billion kilowatts, respectively, +2.52% and +28.27%, respectively, while the feed-in capacity of coal power and gas power in 2023Q3 alone was 257.54 and 5.984 billion kilowatts, respectively, -11.2% and +27.6%, respectively. The overall electricity consumption situation in Guangdong Province tended to ease, which was the main factor in the decline in the company's coal and electricity load in the third quarter. Combined with the high proportion of spot transactions in Guangdong Province, the company's revenue side was greatly affected by this, with a revenue ratio of -0.24% in a single quarter. The decline on the cost side was the main factor in turning the company's profit from a year-on-year loss to a profit. Among them, the company's fuel costs in the first three quarters were -4.82%, corresponding to 2023Q3 operating costs, which fell -18.27% year-on-year to 13.449 billion yuan. Driven by this, gross margin increased sharply, up 17.62 pct to 20.11% year on year, while net operating cash flow increased sharply to 4.309 billion yuan in a single quarter, +55.17% year over year. In addition, the company's Red Sea Bay, Jinghai, and Yunhe power plants undermined their assets by 182, 1.92, and 202 million yuan respectively, undermining overall performance.
Green power: Green power grew steadily, and wind power's feed-in capacity in the first three quarters was +14.52% year-on-year. The company's green power assets have maintained steady operation. In the first three quarters, the company's wind power completed feed-in capacity of 3,257 billion kilowatts, +14.52% over the same period last year. Its units are mainly located in Guangdong Province, so the overall load is stable. It is expected that this part of the performance will continue to grow year on year.
Investment advice: Maintain an “overweight” rating. The company's fundamentals combine the characteristics of both upward cycle bottom and growth. Among them, the coal power business, as the main carrier of performance, is expected to benefit significantly from triple recovery factors such as the downward trend of coal price fluctuations, import coal volume restoration, and Guangdong power load repair, etc., unleashing high performance elasticity, and thermal power and green power companies all have high installed capacity growth. We adjusted the company's net profit forecasts for 2023-2025 to 26.34, 3.68, and 4.314 billion yuan, respectively, turning losses to profit, +27.9%, and +28.1%, respectively, corresponding to the closing price of November 3 PE valuations are 10.7x, 8.4x, and 6.6x, respectively.
Risk warning: sharp rise in thermal coal prices, risk of electricity price fluctuations due to market-based transactions, macroeconomic risks, fluctuations in coal imports