Incidents:

The company released its 2023 annual report and achieved revenue of 122.404 billion yuan in 2023, +4.77% year-on-year; net profit to mother was 1.365 billion yuan, or -410 million yuan for the same period in 2022.

Among them, 2023Q4's quarterly revenue was 31.785 billion yuan, +7.46% year-on-year; net profit to mother was 1.47 billion yuan, compared to -1,174 billion yuan for the same period in 2022.

Opinions:

The 2023 results turned a loss into a profit, and impairment dragged down Q4 results. By business, the total profit of the coal engine, gas engine, wind power, photovoltaic, and hydropower sectors in 2023 was -133 million yuan/3, respectively.

9.2 billion yuan/2,556 billion yuan/480 million yuan/1,383 billion yuan were +59.20/+4.83/+2.70/+0.36/ -244 billion yuan, respectively. Among them, the unit fuel cost for thermal power generation decreased by 27.21 yuan/megawatt-hour compared with the same period last year, driving coal power losses to be drastically reduced. Among them, Q4 accrued asset impairment losses of 1,356 billion yuan. The main reason was that the Inner Mongolia coal and electricity integration project did not meet development conditions after policy adjustments, and the project was terminated.

There is still room for restoration in the coal and electricity sector. In 2023, the company sold 259.4 billion kilowatt-hours of electricity, +5.06% year-on-year, of which thermal power/wind/hydropower/photovoltaics sold +6.21%/+16.53%/-10.30%/+60.79%, respectively; the company's consolidated caliber completed feed-in tariffs (tax included) of 466.41 yuan/megawatt-hour, an increase of 5.62 yuan/megawatt-hour. Looking ahead to 2024, there is still room for further recovery in the company's performance as the cost of coal and electricity falls further.

Renewable energy approval+ has reached 12.8 GW under construction, and the project reserves are sufficient. In 2023, the company added 4.8 GW of installed capacity, including 0.6 GW for thermal power combustion engines, 2.0 GW for wind power projects, and 1.6 GW for photovoltaic projects. The proportion of installed low-carbon clean energy further increased to 37.75%.

In 2023, the company added 12.8 GW of approved capacity, including 2.2 GW of wind power and 5.5 GW of photovoltaics. By the end of 2023, the total number of new energy projects under construction by the company was 5.1 GW, of which 3.0/2.1 GW was wind power/photovoltaics. The company's new energy resources under construction+ approval reached 12.8 GW. The project reserves are sufficient, and it is expected to contribute to increased performance in the future.

Profit forecast and investment rating: Looking ahead to 2024, the company's thermal power performance is expected to continue to improve, and the installed capacity of new energy sources is also expected to increase rapidly. The company's net profit for 2024-2026 is estimated to be 41/51/60 billion yuan, and the corresponding 2024-2026 PE is 12.9/10.5/8.8 times, respectively. First coverage, giving a “buy” rating.

Risk warning: Policy progress falls short of expectations; new installed capacity falls short of expectations; sharp rise in coal prices; reduction in electricity prices; intensification of industry competition, etc.; investment returns fall short of expectations.