Event: The company released its three-quarter report for 2023. The first three quarters of 2023 achieved operating income/net profit of 80.93/539 billion yuan, -1.13%/-24.27% year-on-year; achieved gross margin/net profit margin of 9.67%/6.66%, year-on-year -2.59pct/-2.04pct, respectively; net operating cash flow was 854 million yuan, -16.79% year-on-year. On a quarterly basis, 2023Q3 achieved operating income of 2,607 billion yuan, -7.07% year-on-year; net profit of 143 million yuan, -43.92% year-on-year.
The decline in net profit of 2023Q3 was mainly due to lower trading electricity prices combined with lower transmission and distribution prices.
The year-on-year decline in net profit of 2023Q3 was mainly due to lower market transaction electricity prices for power generation companies belonging to the company in the third quarter, as well as the reduction in transmission and distribution prices in the third regulatory period of the National Development and Reform Commission and the Shanxi Provincial Development and Reform Commission, and the reduction in gross profit space for power distribution companies. From January to September 2023, the company completed power generation capacity of 4.824 billion kilowatt-hours, +7.35% year-on-year; feed-in electricity of 4.386 billion kilowatt-hours, +7.47% year-on-year; and the average feed-in price (tax included) of 328.60 yuan/kilowatt-hour, -23.47% year-on-year.
2023Q3 completed power generation capacity of 1,927 million kilowatt-hours, +7.48% year-on-year; feed-in electricity of 1,757 million kilowatt-hours, +7.71% year-on-year; average feed-in price (tax included) of 31,724 yuan/kilowatt-hour, -32.24% year-on-year.
With Jinkong Group to invest in the construction of a new energy base, the company's strategic transformation has ushered in significant progress. On October 20, 2023, the company announced that it will jointly fund the establishment of Jinneng Holdings Jinbei Energy Co., Ltd., with Jinneng Holding Group, an indirect controlling shareholder, of which Jinneng Holding Group invested 2 billion yuan and the company invested 1 billion yuan to invest in the construction of a new energy base in the Jinbei coal mining subsidence area. It will build a new energy supply and consumption system in the Jinbei region based on large-scale wind and photovoltaic bases, supported by clean, efficient and advanced coal power, and stable, safe and reliable special transmission and substation lines. It plans to focus on building 6 million new energy and 4 million kilowatts of supporting coal power , 1.1 million kilowatts of supporting energy storage, the starting point of the Datong-Huailai-Tianjin-North - Tianjin-South UHV AC transmission channel. In December 2022, the company's strategic positioning was officially adjusted to the capital operation listing platform for Jinneng Holdings Clean Energy. The establishment of this joint venture marks an important step in the company's transition to clean energy.
Profit forecast: Maintaining the company's “buy” rating. We expect the company to achieve operating income of 112.22/125.59/13.562 billion yuan and net profit of 88/9.39/999 billion yuan in 2023-2025, corresponding to PE of 12.72x/12.05x/11.33x, respectively.
Risk warning: changes in the macroeconomic situation at home and abroad have exceeded expectations, the company's power generation and distribution business revenue has fallen short of expectations, changes in coal investment income have exceeded expectations, the clean energy industry injection process has fallen short of expectations, profit forecasts and valuation models have fallen short of expectations, etc.