Huaneng International released its 2023 annual report. In 2023, the company achieved operating income of 254.397 billion yuan, a year-on-year increase of 3.11%, net profit of 8.446 billion yuan, year-on-year reversal of losses, minus non-net profit of 5.6 billion yuan, year-on-year reversal of losses, and basic earnings per share of 0.35 yuan. Shareholders are paid a dividend of RMB 0.2 per common share.
The price of electricity generation increased steadily throughout the year, and profitability continued to increase. Throughout 2023, the company's feed-in electricity volume in China was 447.856 billion kilowatt-hours, an increase of 5.33% over the previous year. The average online settlement price was 508.74 yuan/megawatt-hour, a year-on-year decrease of 0.23%. The proportion of the company's market-based electricity transactions for the full year of 2023 was 88.40%. In 2023, the company's coal-fired, turbine/wind power/photovoltaic/hydropower/biomass power generation capacity was 4010.04/284.93/324.37/109.97/7.89/957 billion kilowatt-hours, respectively, and feed-in tariffs were 491.76/721.04/533.65/473.00/366.45/750.97 yuan/megawatt-hour, respectively. Domestic fuel costs decreased by 14.201 billion yuan, or 8.77%, and domestic operating costs decreased by 9.439 billion yuan year-on-year, or 4.53%. The company's profitability continued to increase.
Depreciation accruals affect performance a lot, and there is still room for recovery in coal and electricity profits. In 2023, Huaneng International's coal revenue was 18.844 billion yuan, an increase of 2.55% over the previous year, achieving a total profit of 433 million yuan. However, the company achieved a total profit of 3,065 billion yuan in Q4 in 2023, mainly due to a rebound in costs and coal prices in the fourth quarter. At the same time, the company accrued fixed asset impairment of 2.02 billion yuan for its six coal-fired power plants, and calculated fixed asset impairment losses of 2,549 billion yuan for the full year of 2023. The impairment greatly affected the annual results. Looking at the current coal price center, the coal and electricity sector still has a lot of room for profit recovery.
The installed capacity of new energy sources is growing rapidly, and the profit contribution is outstanding. In 2023, the company added 2033.2MW/6825.7MW of installed capacity, and the total installed capacity was 15511MW/13100MW respectively, accounting for 11.43%/9.66% respectively. Wind power and photovoltaic power generation reached 32.44 billion kilowatt-hours/11 billion kilowatt-hours respectively, an increase of 15.56%/81.03% over the previous year. The company's wind power/photovoltaic revenue was 15.121 billion yuan/4.665 billion yuan, an increase of 9.88%/64.96% over the previous year. Scenery achieved a total profit of 87.03% of the total electricity sector, and the profit contribution was outstanding. In addition, the technical level of the company's wind power equipment has been continuously upgraded. The installed capacity of large fans of 5 megawatts or more has reached 4,470 megawatts, accounting for 29% of the company's total installed wind power capacity; 11 megawatts of stand-alone fans have been built for offshore wind power in Guangdong.
Investment advice. The company has outstanding advantages as a leading power company in the country. Coal and electricity profits continue to improve, there is broad room for new energy transformation and growth, and overall profitability continues to increase. We expect the company's net profit to be 136.14/148.92/18.853 billion yuan respectively in 2024-2026, 0.87/0.95/1.20 yuan for 2024-2026, and 10.5/9.6/7.6 times for 2023-2025 PE, respectively, maintaining a “buy” rating.
Risk warning: the installation speed falls short of expectations; the promotion of industry policies such as thermal power flexibility transformation and green power trading falls short of expectations; prices of upstream raw materials have risen.