Thermal power profits were drastically restored, and renewable energy profits continued to grow, with a dividend ratio of up to 62%. China Resources Power announced its 23-year results on March 20: revenue +0.03% to HK$103.3 billion; net profit to mother +56.2% YoY to HK$11 billion; and coal-power/renewable energy core profit contributions of +6.19 billion HKD/ +12.5% to HK$36.1/9.73 billion, respectively. The company's 23 annual dividend/special dividend was HK$0.915/0.5 per share, totaling HK$1.415 per share, with a payout ratio of 62%. We expect the company's net profit to the mother of HK$152/171/20.2 billion in 24-26 (previous value: HK$152/172/100 million). Referring to the coal-power/renewable energy 2024E PB/PE Wind unanimously anticipated 0.78/14.2x, giving the company 0.5/14.2x 2023E PB/PE (equity to parent equity/net profit: HK$187/10.8 billion). The PB discount takes into account the company's excellent profitability of new energy assets, and the total market value is discounted by 25% to reflect the potential impact of the new energy spin-off and listing. The target market value is HK$121.8 billion, and the target price is HK$25.33 billion (previous value: HK$23.89), buy.
Coal prices declined in 2023, electricity prices were high, and thermal power profits were drastically restored in 2023. The company completed 148 billion kWh of feed-in electricity from coal power, +2.1% over the same period last year. In 2023, thanks to the decline in coal prices in the market, the unit price of coal imported into the furnace was -12.6% to 987.5 yuan/ton; coal consumption for coal-fired electricity was -0.03% to 297.17 g/kWh, so the unit fuel cost for coal power was -12.6% to 296.3 yuan/MWh. The company's tax-free feed-in price for coal power in 2023 was 425.4 yuan/MWh, -0.6% year-on-year, but it is still high. We estimate the company's coal-fired power core net profit of HK2.4 cents in 2023. The company's thermal power sector accrued asset impairment of HK$760 million in 2023. With the implementation of the two-tier electricity price system and the further advancement of the auxiliary service market, the company's thermal power sector's profit stability is expected to improve in the future. In 2024, the company expects to start producing 927.2 MW of thermal power equity installed capacity.
7.7 GW of new energy was added in 2023, and the number of hours used for wind power in the whole year was +2.2%. In 2023, the company added 6.5 GW of grid-connected capacity to build its own wind power/photovoltaics, and about 1.2 GW of installed equity in mergers and acquisitions of renewable energy projects, adding a total of 7.7 GW. In 2023, the company obtained a wind power/photovoltaic development and construction index of 9.74/9.76GW, totaling 19.5GW, to make sufficient reserves for the high growth of new energy installations in the late 14th Five-Year Plan period.
In 2024, the company expects to add 10 GW of new energy installed capacity. In 2023, the company's wind power/photovoltaic feed-in electricity volume was +12.4%/+111.8% year-on-year to 396.1/2.86 billion kilowatt-hours respectively. Among them, the average number of hours used by wind power was +2.2% to 2,451 hours, 226 hours higher than the national average. Affected by the decline in the RMB exchange rate in 2023, the company's exchange earnings fell from HK$1,994 million in 2022 to HK$66 million, which had a certain impact on the company's profit in 2023.
Target price HK$25.33, maintaining “Buy” rating
The company's net profit for 2024-2026 is estimated to be HK$152/171/202 billion. A target price of HK$25.33 was given, maintaining the “Buy” rating.
Risk warning: 1) The increase in coal prices exceeded expectations; 2) the number of hours used was lower than expected; 3) the market-based electricity price was lower than expected; 4) the implementation of the spin-off listing did not match expectations.