Incident: On April 11, the company released its 2023 annual report. During the reporting period, it achieved operating income of 34.572 billion yuan, an increase of 6.38% over the previous year; net profit attributable to mother of 1,870 billion yuan, an increase of 3014.44% over the previous year (as restated); the company plans to distribute a cash dividend of 0.1 million yuan per share to all shareholders, with a total cash dividend of 388 million yuan, an increase of 3014.44% over the previous year (as restated).
Depreciation has dragged down power units in Jiangsu Province. In 2023, the company completed power generation capacity of 70.654 billion kilowatt-hours, an increase of 6.3% over the previous year. Among them, Jiangsu Coal Power, Shanxi Coal Power, and Jiangsu Gas Power completed 421.77, 224.42, and 6.035 billion kilowatt-hours respectively, up 5.3%, 4.4%, and 22.7% year-on-year respectively.
In 2023, the four power plants of Xinhai Power Generation, Sheyang Port, Guoxin Jingdian, and Guoxin Yangdian in Jiangsu Province achieved a total net profit of 392 million yuan, an increase of 1,792 million yuan over the previous year, successfully reversing losses; however, the three power plants of Huaiyin Power Generation, Huai'an Gas, and Yizheng Thermal Power had an estimated asset impairment of 589 million yuan during the year, so thermal power in Jiangsu Province as a whole has not reversed losses.
The company's units in Shanxi are all Kengkou power plants at the Jinbei coal base. The coal price advantage is significant, and the fuel cost pressure is small. At the same time, after the National Development and Reform Commission approved the DC transmission price of 3.59 cents/kWh (tax included, transmission line loss rate 2.77%), the feed-in electricity price of the Shanxi unit rose 2.09 minutes/kilowatt-hour to 0.4149 yuan/kwh in 2023, an increase of 5.4%; throughout the year, Shanxi units achieved net profit of 692 million yuan, an increase of 344 million yuan, an increase of 98.6% over the year;, the basic performance of the company's thermal power Achieve break-even.
The financial sector lays a safety cushion for performance: In 2023, the company's financial sector achieved operating income (financial enterprise reporting caliber) of 3.04 billion yuan, an increase of 21.3% over the previous year; total profit of 2,711 billion yuan, an increase of 22.5% over the previous year. Investment income from the Bank of Jiangsu is the core profit source for the company's financial sector. In 2023, the Bank of Jiangsu contributed 2,023 billion yuan in investment income, an increase of 4.5% over the previous year, and Leon Life drastically reduced losses of 625 million yuan year on year. Under the dual influence, the company achieved net investment income of 2.07 billion yuan, an increase of 676 million yuan, an increase of 47.2% over the previous year.
Coal prices are in a downward channel, with high 1Q24 performance: On April 8, the company announced that it expects 1Q24 to achieve net profit of 779 million yuan, an increase of 522 million yuan over the previous year, or 202.9%. The average liquidation price of Q5500 coal at the end of Q5500 in 1Q24 was 901.74 yuan/ton, down 20.1% year on year and 5.8% month on month. Currently, thermal coal prices are still in a downward channel, and the 2Q24 improvement performance is expected to continue to improve year over month.
Investment suggestions: The optimization of the electricity and coal procurement structure is compounded by the rapid decline in thermal coal prices. There is still room for continuous improvement in the company's thermal power performance; the financial sector has established stable performance. Based on changes in electricity volume, electricity prices, and investment income, the company's profit forecast is estimated to be 0.73/0.89 yuan (previous value of 0.74/0.91 yuan) for 24/25, respectively, and 1.01 yuan for the new 26 years, corresponding to the closing price of PE 11.8/9.7/8.6 times on April 11, 2024. Referring to the company's historical valuation level, the company is given 12.0 times PE in 2024, and the target price is 8.76 yuan, maintaining a “careful recommendation” rating.
Risk warning: 1) rising fuel costs; 2) insufficient electricity consumption; 3) delays in the payment of subsidies.