The largest power generation company in Zhejiang Province and the only thermal power listing platform under Zhejiang Energy Group. At the end of 2022, the company held 33.11 GW of installed capacity, accounting for 87% and 12% of the installed capacity of coal power, gas and electricity respectively. The company's power generation capacity and installed capacity accounted for more than 50% of the Zhejiang Electric Power Plant. At the same time, it participated in nuclear power companies, and the investment income accounted for more than 30% of the total profit. The company lost 1.8 billion yuan in net profit in 2022. In 2023, it benefited from falling coal prices, forecasted annual profit of 6.106 billion to 7.318 billion yuan, and a sharp increase of 79.35 to 9.147 billion yuan over the previous year. Dividends are expected to recover (2015-2020 dividend rate of more than 50%). If calculated based on the performance center and 50% dividend rate, the current dividend rate is close to 5%.
High ROE expects dividends and net asset growth, and the estimated net assets are expected to increase by 20% +. The company's power generation capacity in 2023 was 163.2 billion kilowatt-hours (+7.4% year-on-year). Currently, the company's thermal power profit has been drastically recovered (23Q3 weighted ROE reached 9.3%, compared to 9.2% in 2020), and it is estimated that the net assets of thermal power in operation in 23Q3 have been restored to 87%. The supply and demand for electricity in Zhejiang is tight. It is expected that the high ROE level will be maintained along with the maintenance of the Changxie Coal contract and the implementation of electricity prices for coal power capacity/auxiliary services; considering the full commissioning of the coal power project under construction and the installed capacity of the company exceeds 40 GW, the net assets are expected to reach 96.4 billion yuan.
Participating in nuclear power stabilizes earnings, and opens up a new track by investing in shares. Earlier, the company relied on resources within the province to lay out the nuclear power sector in depth. At the end of 2022, it participated in 2.48 GW of nuclear power equity installations. Nuclear power contributed nearly 1.4 billion yuan in investment income during the same period, becoming a ballast stone for stable performance, and there is still room for double growth in reserve equity installations. In February 2023, the company acquired Zhonglai shares of the listed company and became the actual controller (9.7% shareholding, 19.7% voting rights) and expanded the new energy equipment manufacturing business. 2023Q1-3 Zhonglai achieved net profit of 480 million yuan (+40.9% over the same period last year), and there is room for long-term growth.
Profit forecasting and investment advice. The company's net profit from 2023 to 2025 is estimated to be 68.70, 81.17, and 9.423 billion yuan, respectively, and the PE corresponding to the latest closing price is 10.74, 9.09, and 7.83 times, respectively. Coastal thermal power plant with high ROE expectations for dividends and net asset growth. Referring to peer valuation, the company is expected to accelerate the utilitariization process and give it a PB valuation of 1.3 times in 2024, corresponding to a reasonable value of 6.63 yuan/share, and for the first time, a “buy” rating.
Risk warning. Fluctuations in coal prices; decline in utilization hours; project construction progress falls short of expectations, etc.