Maintaining an “increase in holdings” rating: Considering factors such as changes in the company's electricity prices, the company's net profit from 2024 to 2025 was lowered to 64.4/6.58 billion yuan (original value of 65.7/7.25 billion yuan), giving the company a net profit of 7.03 billion yuan in 2026; we expect the company's EPS to be 0.63/0.64/0.69 yuan from 2024 to 2026, and the current stock price corresponding to PE (2024E) is 6.1 times. Maintain the target price of HK$5.30 and maintain the “Overweight” rating.
The 4Q23 results were in line with expectations. The company's revenue in 2023 was 116.4 billion yuan, +9.8% year-on-year; net profit to mother was 4.60 billion yuan, reversing the year-on-year loss. The company plans to pay a dividend of $0.15 per share in 2023, accounting for 43.7% of net profit attributable to common shareholders.
Gross profit declined month-on-month, and asset impairment narrowed year-on-year. The company's gross profit margin in 2023 was 6.4%, +6.0 ppts year over year. We estimate that the year-on-year increase in the company's 2023 performance was mainly due to a decrease in fuel costs: the company's fuel costs in 2023 were about 75.5 billion yuan, -8.93% over the same period last year. Considering changes in price factors, we expect the company's 1Q24E coal and electricity division's profit to recover to the 2~3Q23 level. The company accrued net asset and credit impairment in 2023 of $310 million, -71.2% year-on-year.
The balance sheet continues to be repaired, and there is still room for potential improvement in dividends. The company's balance sheet continued to recover: as of the end of 4Q23, the company's balance ratio was 62.6%, -0.04 ppts month-on-month; the balance of perpetual bonds was 30.7 billion yuan, -2.90 billion yuan. The company plans to invest RMB 9.7 billion in 2024, which is -7.5% of the actual capital expenditure in 2023. We expect that in the context of stable profits from thermal power assets and a marginal slowdown in capital expenditure, the company not only can its balance sheet be further repaired, but there is still room for potential improvement in its forward dividend capacity.
Risk warning: Feed-in electricity prices fall short of expectations, asset impairment charges exceed expectations, etc.