The 2023 results are in line with expectations: the company achieved revenue of 343.1 billion yuan in 2023, a year-on-year decrease of 0.4%; realized net profit to mother of 64.6 billion yuan, a year-on-year decrease of 11.4%. In 2023, the company plans to pay a cash dividend of 2.26 yuan/share (tax included), for a total of 44.9 billion yuan. The dividend ratio under international accounting standards is 69.5%, the same as in 2022.
Changxie's share of sales gradually smoothed out coal price fluctuations: the company's coal business in 2023 was affected by strong market demand, and production and sales rose sharply. Coal production in 2023 was 321 million tons, up 3.5% year over year. Coal sales reached 450 million tons, up 7.7% year on year; the coal business achieved revenue of 273.3 billion yuan, down 1.5% year on year. Labor costs dropped sharply due to wage accounting and assessment adjustments in the fourth quarter. Affected by this, the company's production cost per unit of coal production in 2023 was 162 yuan/ton, a decrease of 2.3% over the previous year. Looking at the coal sales structure, the company's long-term cooperation ratio continued to increase in 2023, an increase of 4.5 pct over the same period last year. The annual sales price of Changxie is different from spot and monthly Changxie. The average annual Changxie price decreased by only 2.9% year on year, and the price fluctuation was far less than the market spot price. The company's high sales ratio is more conducive to stabilizing the profit level of the coal business during periods of fluctuating coal prices. In terms of additional production capacity, the first and second wells of Xinjie in the Taigemiao mining area of Xinjie in Inner Mongolia have obtained mining licenses. Baode coal mine production capacity increased from 5 million tons/year to 8 million tons/year nuclear increase application approved, and the increase in coal production capacity continues to stabilize the leading position of domestic coal.
Steady growth in power generation is hedging the impact of fluctuations in coal prices: in 2023, the company's total installed capacity of power generation was 45 gigawatts, of which 43 gigawatts were installed for coal-fired power generation. Thanks to new installations connected to the grid, the company's power generation capacity increased 11% year on year in 2023, compounded by falling coal prices and the advantage of coal resources, which led to a 5% year-on-year reduction in the cost of electricity sales per unit. The company's integrated coal and electricity operation model greatly relieves the company's profit pressure during periods of fluctuating coal prices.
Currently, the company still has about 7 gigawatts of coal power installations under construction. With the continuous commissioning of new installations and the capacity electricity price policy to recover some of the fixed costs of coal power, the company's power generation capacity and revenue scale are expected to maintain steady growth in the future.
The target price is HK$37.49, maintaining the purchase rating: Looking ahead to 2024, the company's integrated industrial operation advantages will continue to be reflected. The sales structure of Gaochang Coal will stabilize profit levels, superimposed new installed capacity to hedge against fluctuations in coal prices. The company's profit stability is strong, and the past has focused on shareholder returns to maintain a high dividend ratio over the long term. The company's high cash flow and high dividend payout characteristics have long-term investment value. Considering the current coal price level and thermal coal demand in 2024, we adjusted the 2024-2026 net profit forecast to $633/635/63.7 billion, giving a target price of HK$37.49, corresponding 11 times PE in 2024. There is room for an increase of 18% compared to the current price, and the purchase rating is maintained.
Risk factors: Changxie coal prices have dropped sharply, and the new installed capacity for power generation falls short of expectations.