The company announced that it achieved revenue, net profit, and net profit of 606.77, 35.50, and 2,576 billion yuan in 2023, an increase of 9.60%, 24.23%, and 8.01% year-on-year. Among them, Q4 revenue for the single quarter, net profit, and net profit after deducting non-net profit was 15.9.10, 6.39, and -113 million yuan, an increase of 7.38%, 78.44%, and -145.92% year-on-year.
The performance was in line with expectations. In 2023, the company's overall business scale maintained steady growth. The share of the revenue structure of energy efficient equipment such as thermal power increased to nearly 34%, and the share of new energy businesses such as wind power declined. The structural changes in the business led to a slight increase in gross margin to 18.8%, and the overall cost ratio was stable. Other income was 439 million yuan. The significant increase was mainly due to the disposition of Sichuan Energy Investment shares. After considering the above factors, the company's annual net interest rate increased by 0.7 pcts to 5.9%. The company's debt ratio at the end of the period was 66%, and cash in hand was $171 billion.
A leader in thermal power equipment, benefiting from the recovery of thermal power, and increasing the contribution of flexibility transformation. Investment in thermal power continued to decline after 2014-2015, causing a series of problems. Policies have begun to be corrected in recent years. The indispensability of thermal power now and for quite some time in the future has been re-understood. Thermal power gradually recovered, and approved capacity began to increase markedly at the end of 2021. 65.7 GW of new installed capacity was added throughout 2023, an increase of 47% over the previous year. The domestic share of the company's thermal power equipment is around 30-40%. In 2023, sales of main boiler/steam turbine/generator equipment increased by 3%/30%/12% year on year, achieving revenue of 13.9 billion yuan, up 29% year on year, and gross margin reaching 23%, which is an important increase in the company's performance. Orders for clean and efficient energy equipment increased 57% year-on-year throughout the year, and the thermal power equipment business is expected to continue its rapid growth rate. Furthermore, the wind penetration rate has continued to increase in recent years, and the issue of new energy consumption is more serious and urgent. Compared with new energy storage, flexible transformation, gas power generation capital expenses are lower, and the technology is mature, and it is expected to achieve relatively rapid development. Usually, the original thermal power equipment participants have an advantage in the transformation, and the company, as the three core thermal power equipment companies, is expected to directly participate in the upgrade. At the same time, the company maintained the top share of gas and electricity during the reporting period, and will continue to benefit.
The construction of pumped energy storage has been accelerated, creating a continuous driving force for growth. According to the Energy Administration's plan, 60/120GW pumping stations will be built separately by 2025/2030, and the next 5-10 years will be a large-scale construction period for pumped energy storage. In 2023, nearly 50 new domestic approved savings projects were added, with a capacity of 64.6 GW, maintaining a high level. Savings contracts account for 90% of the total hydropower equipment contract capacity of domestic enterprises. The company is the world's leading supplier of hydropower equipment and one of the two domestic pumping unit suppliers. Hydropower unit sales increased 88% year-on-year in 2023, and the hydropower equipment business is expected to rise rapidly. Considering the longer construction cycle of savings projects, the contribution to the growth of the storage business will be more sustainable.
Businesses such as nuclear power are also expected to contribute to growth. In the past two years, China has approved 10 units every year, and the pace of nuclear power construction has accelerated. During the reporting period, the company's nuclear power equipment revenue was 2.9 billion yuan, an increase of 41% over the previous year. At the same time, it also obtained prototype development projects for new reactor types such as lead-bismuth reactors and cryogenic reactors, promoting technological reserve innovation, and the nuclear power business is expected to continue to contribute to growth. Furthermore, in 2023, the company won the bid for hydrogen vehicles and electrolytic hydrogen production projects. In fact, TEPCO began cultivating the hydrogen energy industry more than ten years ago, forming a complete layout of manufacturing, storage, transportation and application side, which is also expected to become a new growth point for the company in the future.
Investment advice: The company is a core supplier of clean power equipment, benefiting from the recovery of thermal power, while contributing to new growth such as pumping water and energy storage. It is predicted that the company will achieve net profit of 4.19 billion in 2024, maintaining a highly recommended rating.
Risk warning: Risk of policy adjustments, new business expansion falls short of expectations, and power investment falls short of expectations.