Events: 2023Q3, the company achieved operating income of 2,966 billion yuan, up 3.47% year on year; realized net profit of 125 million yuan, down 54.1% year on year; weighted ROE was 1.16%, down 1.53 pct from the same period last year; basic EPS was 0.0774 yuan, down 53.85% year on year. In the first three quarters of 2023, the company achieved operating income of 8.593 billion yuan, up 8.82% year on year; realized net profit of 926 million yuan, up 40.42% year on year; weighted ROE was 8.75%, up 1.31 pct over the same period last year; and basic EPS was 572.9 billion yuan, up 33.17% year on year.
Fuel costs continue to decline, and clean energy performance is recovering. From January to September 2023, the company completed settlement of 9.575 million tons of steam, a year-on-year decrease of 9.87%; completed settlement of 7.086 billion kilowatt-hours of electricity, a year-on-year decrease of 4.49%; and completed garbage disposal of 1,674,900 tons, an increase of 7.88% over the previous year. The company continues to optimize its asset structure and obtain relevant equity disposal income and debt settlement income. From 2022H1 to 2023H1, there were high non-recurring gains and losses, which were also the main factors affecting changes in net profit. The operating situation of the main business can be reflected from data on deducting non-net profit. In the third quarter of 2023, net profit after deducting non-net profit increased 199.98% year on year, up 108.38% year on year. The main reason is that fuel prices such as natural gas and coal fell year on year, and the performance of combustion engine and coal-fired cogeneration power plants increased significantly year on year. Furthermore, during the third quarter, the company plans to acquire shares in a number of photovoltaic power plant projects, and the scale of clean energy installations is expected to increase.
Actively promote digital energy business and sign strategic cooperation with various parties. On June 29, the company and Huawei Digital Energy reached a comprehensive cooperation on the construction of an integrated liquid-cooled supercharging network for “storage, charging, and cloud”, and plans to build and operate 50 fully liquid-cooled supercharging stations within 3 years in the Yangtze River Delta and the Greater Bay Area; on July 19, GCL Group, Huawei Digital Energy and the Zhengzhou Municipal Government signed a strategic cooperation framework agreement focusing on “supercharging city”, “computing power city”, city “pumping and storage”; on August 27, GCL's Suzhou Xiangcheng project was officially put into operation, which is the first energy computing center in China.
Investment suggestions: The company is expected to achieve operating income of 121.17, 151.51, and 17.436 billion yuan respectively in 2023-2025, up 13.4%, 25%, and 15.1% year on year; realized net profit of 13.76, 17.47, and 2.01 billion yuan respectively, up 102.4%, 27% and 14.5% year on year. The corresponding EPS is 0.85, 1.08, and 1.23 yuan, and the corresponding PE is 13.5, 10.6, and 9.3 times, maintaining the “increase in holdings” rating.
Risk warning: downside macroeconomic risk; risk of electrified vehicles falling short of expectations; risk of mobile energy business development falling short of expectations; risk of falling gross margin due to continued rise in fuel prices; risk of falling gross margin; risk of construction of clean energy projects falling short of expectations; risk of government approval risk.