Wind power generation increased by only 0.4% year-on-year in 2023
Recently, the company announced mixed operating figures for 2023. Wind power generation for the year increased by only 0.4% year on year to 14,081 gigawatt-hours. The year-on-year growth rate was lower than 4.2% in 2022, which was slightly lower than expected. We attributed wind resource contingency to not ideal.
Despite this, we expect wind power generation to rise sharply by 19.2% and 22.5% year-on-year in 2024-25 to 16,779 and 20,546 gigawatt-hours, respectively, due to increased installed capacity combined with improvements in wind resources.
Natural gas sales increased 15.9% year over year in 2023
Natural gas sales in 2023 rose 15.9% year on year to 4,503 million cubic meters. The year-on-year growth rate was higher than 2.0% in 2022, which was better than expected, mainly due to (1) China's economic recovery driving gas consumption growth; (2) in June 2023, the first phase of the Hebei Tangshan LNG project was officially put into operation. By classification, the company's annual wholesale, retail, and CNG/LNG sales increased by 0.3%, 8.8%, and 509.5% year-on-year respectively to 1,962, 2,000, and 541 million cubic meters. As the economy continues to improve and the efficiency of the first phase of the Tangshan LNG project increases, we conservatively expect natural gas sales to increase 4.1% and 6.7% year-on-year to 4,686 and 5,000 million cubic meters respectively in 2024-25.
Adjust 2023-25 earnings forecast
Since the gross margin of the new energy business (including wind power and photovoltaics) has always been higher than that of the natural gas business (note: 1H23 gross margins of new energy and natural gas were 66.3% and 7.6%, respectively), the slowdown in wind power generation growth last year will affect profits in 2023. We lowered our 2023 net shareholders' profit forecast by 2.2%, but raised our 2024-25 net profit forecast by 0.4% and 0.1%, respectively.
Reiterate the “buy” rating
Accordingly, we slightly raised the target price for H shares from HK$4.42 to HK$4.45, corresponding to 6.0 times the 2024 target price-earnings ratio and 68.5% room for growth. Maintain a “buy” rating.
Risk warning: (1) risk of accounts receivable, (2) sharp drop in grid-connected electricity prices, and (3) rising natural gas costs.