Core views:
Electricity consumption has increased and costs have been reduced, and the first quarter results have exceeded expectations. The company released a performance forecast for the 1st quarter of '24. In 24Q1, it is expected to achieve net profit of 71-92 million yuan (+129% to 196% year over year). The sharp increase in performance is mainly due to improved hydropower generation from incoming water, an increase in installed thermal power generation, a fall in coal prices, a reduction in fuel costs, and an increase in wind and solar power generation. In addition, the company announced on March 30 that it plans to transfer shares in Changjiang Securities, with a total transfer price of 4.343 billion yuan. It is expected to increase investment income at one time, return cash to help reinvest, and the sale of financial assets will also help increase valuation.
The 24-year performance is expected to continue to improve due to improved incoming water, falling coal prices, and high landscape growth. According to the company's electricity volume announcement, since June 23, incoming water from the watershed where the company's hydropower station is located has improved. The annual hydropower generation capacity is 11 billion kilowatt-hours (+10.8% year over year), but it is still more than 2 billion kilowatt-hours lower than 2020-2021. Since the beginning of this year, the water level has been high and incoming water preferences. 24Q1's hydropower generation capacity is 3.465 billion kilowatt-hours (+176% year over year); 2 1GW thermal power plants in Xiangyang Yicheng will be put into operation in the second half of 2023, and will contribute to the performance in 2024. YoY +12.5%, stack Coal prices declined, and thermal power profits improved; new energy generation capacity in 2024Q1 was +31.89% year-on-year.
Water, fire, and landscape storage are developed collaboratively, and there is plenty of room for growth. According to the company's official website, the company plans to have a total installed capacity of 22 GW by the end of the 14th Five-Year Plan, including more than 15 GW of renewable energy. According to the company's financial report, hydropower: Linxi River Hydropower has been included in the 14th Five-Year Plan of Hubei Province; thermal power: falling coal prices continue to restore profits; Scenery: The planned new energy installed capacity exceeded 10GW at the end of the 14th Five-Year Plan, and the CAGR of new energy installed in 22-25 reached 51%. Pumped energy storage: The original Luotian Pingtan project has started, and the Changyang Qingjiang and Hubei Nanzhang projects have been commissioned to build the Three Gorges. The total installed capacity is 4.4 GW, and there is plenty of room for diversified growth.
Profit forecasting and investment advice. The company's net profit from 2023 to 2025 is estimated to be 18.1/28.9/3.18 billion yuan, respectively, and the PE corresponding to the latest closing price is 21.1/13.3/12.0 times, respectively.
Profits from thermal power and hydropower continue to recover, and there is plenty of room for growth in new energy+pumped storage. Referring to peer valuation, the company was given a PE valuation of 16 times in 2024, corresponding to a reasonable value of 7.09 yuan/share, maintaining the “buy” rating of Hubei Energy.
Risk warning. Project construction has fallen short of expectations; incoming water has fluctuated; coal prices have risen sharply, etc.