Incident Overview: On January 19, the company announced its 2023 performance forecast. It is expected to achieve net profit of 61.06-7.318 billion yuan for the whole year, an increase of 79.35-9.147 billion yuan, turning a year-on-year loss into a profit; net profit after deducting non-attributable net profit of 5.789-6.942 billion yuan, an increase of 80.21 to 9.174 billion yuan over the previous year, and a year-on-year loss to profit.
4Q23 significantly reversed losses year-on-year: According to our estimates, Q4 achieved net profit of 144-1,356 billion yuan, an increase of 2,429-3.641 billion yuan over the previous year, turning a year-on-year loss into a profit; net profit without return to mother was 127-1,280 million yuan, an increase of 25.85-37.38 billion yuan over the previous year, turning a year-on-year loss into a profit.
Electricity consumption continues to increase: In 2023, the company completed a cumulative total of 163.238 billion kilowatt-hours of power generation, an increase of 7.4% over the previous year, of which thermal power generation was 162,974 billion kilowatt-hours, an increase of 7.3% over the previous year. Electricity consumption in Zhejiang Province increased 7.1%/10.7% year-on-year in October/November 2023, respectively. Driven by strong demand, the company's thermal power generation capacity was 25.909 billion kilowatt-hours in October-November 2023, an increase of 13.5%; we estimate that in December of the same year, the company's thermal power generation capacity was 16.469 billion kilowatt-hours, an increase of 23.9% year on year, continuing the high increase trend in the previous period.
Fuel costs continue to improve: On the cost side, we estimate that the average liquidation price of Q5500 Q5500 at Q3Q23/4Q23 Qinhuangdao Port was 866/958 yuan/ton, a year-on-year decrease of 31.5%/33.0%, and the company's profitability continued to improve.
Continued “dual carbon” layout and steady growth: In December 2023, the company announced an investment of 1 billion yuan to participate in the establishment of a “dual carbon” technology fund (total pledge scale of 5.278 billion yuan). The company circumvented competition restrictions in the industry and laid out a “dual carbon” future through private equity investment. On January 5, 2024, the company's subsidiary Zhonglai Co., Ltd. announced that the first phase of the 16GW high-efficiency monocrystalline battery smart factory project has been put into operation, the main equipment of the second phase 8GW project has been installed, and some production lines are undergoing secondary distribution; the industrial silicon with an annual output of 200,000 tons and the high-purity polysilicon project with an annual output of 100,000 tons has obtained an enterprise investment project registration certificate in Shanxi Province, and China's business is growing steadily.
Investment advice: In 4Q23, the company's electricity production increased, while benefiting from improved fuel costs, high performance flexibility was fully demonstrated. Maintaining the company's profit forecast, EPS is expected to be 0.49/0.53/0.56 yuan for 23/24/25, respectively, and the PE corresponding closing price on January 19 is 10.3/9.4/8.9 times, respectively. Referring to the company's historical valuation level, the company was given 12.0 times PE in 2024, with a target price of 6.36 yuan/share, maintaining a “careful recommendation” rating.
Risk warning: 1) macroeconomic pressure reduces electricity demand; 2) rising fuel prices increase operating costs; 3) power market competition reduces feed-in tariffs; 4) supply structure adjustments press unit output.