2023 results are largely in line with market expectations
The company announced 2023 results: revenue of 20.3 billion yuan, +9.3% year over year; net profit to mother of 2.21 billion yuan, -3.8% year over year, corresponding to profit of 0.53 yuan per share, which is basically in line with market expectations. The company plans to pay a final dividend of 0.214 yuan/share, with a dividend ratio of 40.6%.
In 2023, the company's new energy business generated 14.254 billion kilowatt-hours, which was basically the same as the previous year. The average feed-in price was 0.44 yuan/kilowatt-hour (excluding tax), -0.01 yuan/kilowatt-hour. The total gas transmission volume of the natural gas business was 5.114 billion cubic meters, +13.6% year over year, and 4.503 billion cubic meters of gas, +15.9% year on year.
Development trends
The gas volume growth rate may remain above 20% in 2024-25. 2H23's natural gas sales volume was +44% year-on-year to 2.44 billion square meters, mainly due to a marked increase in the company's LNG sales volume after the Tangshan LNG terminal was put into operation in June 23 (2H23's LNG sales volume was 50 million square meters, +1,124% year over year). Looking ahead, considering that 1) the company is currently implementing a long-term LNG contract of 1 million tons/year (about 1.4 billion square meters of LNG), and 2) the LNG spot price remains relatively low, we believe that the company's LNG sales growth rate is expected to continue to maintain a high level in 2024-25, driving the company's overall gas sales growth rate by more than 20%.
The scale of capital expenditure on new energy sources has increased significantly. At the performance meeting, management indicated that the capital expenditure of the new energy business in 2024 may increase significantly year-on-year (about 2.07 billion yuan in 2023), mainly for wind power project construction. We believe that the increase in the scale of capital expenditure is expected to drive the company's annual increase in installed wind power from about 500,000 kilowatts to 80-1 million kilowatts in 2024-25.
Profit forecasting and valuation
Considering the relatively low gross margin of new affordable wind power projects, we lowered our 2024 profit forecast by 19.3% to 2,483 billion yuan and introduced a profit forecast of 2,924 billion yuan for the first time in 2025. The current A share price corresponds to the 2024/2025 price-earnings ratio of 13.7 times/11.7 times. The current H share price corresponds to the 2024/2025 price-earnings ratio of 4.4 times/3.6 times. Taking into account the potential catalytic effects of profit forecast adjustments and rising gas volume growth/new energy installed capacity on the company's valuation, A shares maintained an outperforming industry rating and a target price of 10.00 yuan, corresponding to 16.9 times the 2024 price-earnings ratio and 14.3 times the 2025 price-earnings ratio. There is 22.9% upside compared to the current stock price. H shares remain outperforming the industry rating and the target price of HK$3.50, corresponding to 5.3 times the 2024 price-earnings ratio and 4.3 times the 2025 price-earnings ratio, with 18.2% upside compared to the current stock price.
risks
The price of wind power has been drastically reduced, and the price of LNG has fluctuated greatly.