Water depletion in 2023 affected performance: In 2023, the company achieved revenue of 44.262 billion yuan, an increase of 1.3% year on year, and profit to mother was 2.66 billion yuan, an increase of 7.2% year on year. Net profit split from division to mother: coal power sector profits of 928 million yuan, wind power profits of 2,222 million yuan, photovoltaic profits of 999 million yuan, and hydropower losses of 532 million yuan. The company plans to pay a dividend of RMB 0.132, increasing the dividend ratio to 61%, and maintaining a high dividend ratio.
Coal and electricity losses have achieved remarkable results, and hydropower expectations have been restored: in 2023, the company introduced some loss-making coal power plants, which greatly improved the profit level of coal power. Unit fuel costs decreased by 12.46% year on year, coal consumption for electricity supply decreased by 1.21% year on year, net profit from coal and electricity to mother was 928 million yuan, and a loss of 592 million yuan in the same period last year. In 2023, the company's water current area was affected by the drying up of incoming water, and electricity sales fell 35.5% year on year, resulting in a loss of 530 million yuan. In 2024, the company's hydropower was affected by the El Niño climate, and incoming water is expected to recover; coal supply and demand are still relaxed, and coal prices are expected to drop slightly throughout the year. The superimposed capacity electricity price policy has been implemented to recover some of the fixed costs of coal power. It is expected that the profits of the company's coal power and hydropower business will continue to recover throughout the year.
Accelerated development of new energy installations: The company started production of 13 GW of new energy installations in 2023. Among them, the acquisition of 9GW of the Group's power generation assets led to a 69.23% year-on-year increase in wind power sales, a 49.43% year-on-year increase in photovoltaic electricity sales, and a year-on-year increase of 82.5%/46.9%, respectively. However, due to new installations being mainly affordable projects, the company's average feed-in electricity price for wind power/photovoltaics in 2023 decreased by 1.5%/6.3% year-on-year. By the end of 2023, the company's total clean energy accounts for 75.4% of installed capacity, and plans to add about 7 GW of installed capacity in 2024, with a target of 90% clean energy installed by 2025. The accelerated development of new energy projects and the Group's asset package acquired last year will bring continued and steady profit growth to the company.
The target price is HK$4.64, maintaining the purchase rating: the company's profit growth in 2024 is highly certain. Group project injections will fully contribute to profits, and the return of self-invested projects will increase under the current low cost trend; hydropower profits benefit from the restoration of incoming water, and coal power benefits from maintaining leading cost control, and the implementation of the superimposed capacity electricity price policy. We expect the company's net profit to be 4,51/76 billion yuan in 2024-2026, an increase of 70/35/ 25% year-on-year. Due to the decline in electricity prices due to the increase in the proportion of new energy consumption and market-based transactions, we lowered the valuation of the NEV sector to 9X PE. The company's reasonable market value in 2024 was HK$57.4 billion, corresponding target price of HK$4.64. The coal electricity/hydropower/new energy sector was valued at 1XPB/8XPE/9XPE respectively. There is room for 44% increase compared to the current price, maintaining the purchase rating.
Risk factors: New installed capacity falls short of expectations, electricity demand falls short of expectations, and feed-in tariffs have dropped sharply.