The one-time asset impairment was slightly higher, and the regular dividend payout ratio remained flat. The company's profit in 2023 rose 56% to HK$11 billion, 6%/12% lower than market expectations/our expectations, mainly affected by one-time asset depreciation of approximately HK$2 billion higher than expected. Excluding the effects of impairment, the company's core profit should reach HK$13.3 billion. The thermal power sector's operating profit for the second half of 2023 reached HK$3.9 billion (HK$1.6 billion in the first half of the year), a marked improvement from month to month, while fuel costs decreased by 12.6% year on year in 2023. Also, excluding the effects of impairment, the operating profit of the renewable energy sector increased 14% year over year. In terms of additional installed capacity, self-built/merger and acquisition wind and light projects during the period were 6.5/1.2 gigawatts (7.7 gigawatts in total), higher than our expectations of 6.5 gigawatts. The company's final interest rate was HK$0.587, and the regular dividend payout ratio was maintained at 40% throughout the year. Coupled with the previously announced special dividend of HK$0.5 for the 20th anniversary of listing, the annual dividend ratio is 62%.

The speed of installation is driving profits, and the debt ratio will reach a recent high level in 2024. Management expects the company's new wind and light installation to be 10 gigawatts in 2024, which is higher than our original forecast of 7 gigawatts. Based on the current 7.3/6.1 gigawatts of installed wind and light installed by the company, we tend to believe that the company can achieve the annual installed capacity target. At the same time, it is estimated that the company can maintain an additional installed capacity of 10 gigawatts or more from 2025 to 2026. Due to the company's accelerated installation process, it is currently estimated that it will push the net debt/total equity ratio in 2024 to a high of 152% in the next three years, higher than the 2021-2023 average of 128%. As operating cash flow increases, we estimate that the net debt/total equity ratio will fall back to 126% in 2026. As for the regular dividend rate in the future, we believe that the company will remain at 40% in 2024, and the increase in dividends per share will depend on the increase in the company's profit.

Profits will continue to grow rapidly for the next three years, and the 7% dividend ratio is still attractive, maintaining the buying rating. We lowered our 2024/2025 earnings forecast per share by 16%/10% to reflect: (1) more conservative wind/light utilization hours after considering short-term grid consumption capacity (down about 3%); (2) additional annual impairment of approximately HK$1 billion (previous forecast was zero). Currently, we expect the company's compound earnings per share growth of 28% between 2023-2026. In terms of valuation, the base year of our division valuation law was changed to 2024. Considering the decline in the average valuation of the Hong Kong stock operator sub-sector in the past 6 months, we also lowered the valuation of the company's renewable energy sector from 10 times to 8 times the predicted price-earnings ratio. The target price was raised from HK$21.6 to HK$22.7, maintaining the buy rating. The company's stock price has risen by about 20% since the beginning of the year. It is estimated that some investors will choose to profit first when the short-term dividend payout ratio is limited by the debt ratio. However, the current forecast dividend rate of 7% for 2024 is still attractive and will support an increase in the mid-term valuation.