Introduction to this report:
4Q23 Impairment and other factors dragged down performance. We expect the company to strengthen market value management and increase the dividend ratio.
Key points of investment:
Maintain a “cautious increase” rating: Taking into account factors such as falling coal and new energy electricity prices, the 2024-2025 EPS will be lowered to 0.22/0.27 yuan (originally 0.26/0.30 yuan), and the 2026 EPS will be given 0.33 yuan. Based on the comparable company's PE valuation situation, the company was given a 12x PE valuation in 2025, the target price was lowered to 3.24 yuan, and the “prudent increase” rating was maintained.
The 4Q23 results were in line with expectations. The company's revenue in 2023 was 122.4 billion yuan, +4.8% year-on-year; net profit to mother was 1.37 billion yuan, reversing the year-on-year loss. On a quarterly basis, 4Q23 revenue was 31.8 billion yuan, +7.5% year-on-year; net profit to mother was 1.47 billion yuan, a year-on-year increase of 3.0 billion yuan, in line with the performance forecast range.
4Q23 Depreciation and other factors dragged down the company's performance. The company's 4Q23 feed-in electricity volume was 65.3 billion kilowatt-hours, +7.3%/-15.2% YoY. We estimate that the average electricity price in 4Q23 was 0.461 yuan/kilowatt-hour, -0.8%/+4.3% YoY. The company's 4Q23 gross profit margin was 14.6%, +9.8/+1.0ppts YoY. We estimate that the month-on-month decline in the company's 4Q23 performance was mainly dragged down by impairment and income tax increases: 1) the company accrued asset impairment of 1.36 billion yuan in 4Q23; 2) the company paid 1.45 billion yuan in income tax in 4Q23, +1.40 billion yuan year-on-year.
The dividend value is expected to be released. In 2023, the company plans to pay 140 million yuan in dividends, accounting for 10.2% of net profit attributable to mother. In January 2024, the State Assets Administration Commission proposed that market value management results be included in the performance assessment of central enterprise leaders to guide central enterprises to increase their cash dividends to repay investors. We expect that in the context of the market value management of central enterprises included in the assessment, the company's dividend value is expected to be released (according to the “Articles of Association”, the company's annual profit distributed in cash is, in principle, 50% of the parent company's net profit).
Risk warning: coal prices exceed expectations, new energy installations fall short of expectations, large deductions, etc.