Brief performance review
On April 22, 2024, the company's H shares disclosed the 2023 annual report. In 2023, it achieved revenue of 37.64 billion yuan, -5.6% year-on-year; realized net profit to mother of 6.36 billion yuan, +23.6% year-on-year. In 2023, the company plans to pay a cash dividend of RMB 0.2225 per share (tax included), compared with RMB 0.1171 (tax included) per share in the previous year, +90.0% over the same period last year.
Management analysis
The “big generation to small” calculation of impairment affects short-term performance. In the long run, it will provide the company with endogenous growth impetus. By the end of 2023, the installed capacity of wind power controlled by the company reached 27.754 million kilowatts, an increase of 1.562 million kilowatts over the previous year, and a growth rate of 6.0%. The annual wind power generation capacity was 61.35 billion kilowatt-hours, +5.2% year over year, and the average feed-in price was 0.457 yuan/kWh, -5.0% year over year. The wind power sector achieved revenue of 27.50 billion yuan, a slight increase of 1.1% year over year. Resources that can be developed for onshore wind power are limited, and competition for project resources has been fierce in recent years; since the company entered the industry early, has many old wind farms, and good wind resource conditions, it can support development space by “big generation and small”. In 2023, the company successfully put into operation the “Big Generation to Small” demonstration project in Helan Mountain in Ningxia, bringing the company a 200MW increase in wind power installation, while making Ningxia the province with the third largest increase in installed capacity. However, “big generation to small” will disrupt the company's short-term performance, causing asset impairment losses of about 1.51 billion yuan in 2023 (impairment of about 590 million yuan in the same period last year), causing the wind power sector's operating profit to -5.3% over the same period last year.
2H23 new energy development indicators have been accelerated, and photovoltaics has become the main battleground for the company's future growth.
In 2023, the Group added 54 GW of new resource reserves, including 24.65 GW of wind power and 23.95G of photovoltaics; obtained 19.8 GW of new energy development indicators for the whole year (wind power and photovoltaics account for 22.3% and 64.9% respectively). With 1H23 achieving 5.6 GW less energy development indicators than year on year, 2H23 clearly gained strength, and finally achieved a 1.5 GW year-on-year increase in the scale of the new energy development index obtained throughout the year, laying a solid foundation for the company's future growth. According to the company's public answers to investors' questions, in 2024, the company plans to start 10 GW of new energy projects throughout the year and strive to put into production 7.5 GW.
Profit Forecasts, Valuations, and Ratings
Considering that the company relies on Guoneng Group and has an integrated advantage, it has a first-mover advantage and scale effect as an established wind power operator, and can enjoy endogenous+epitaxial co-driven growth. We expect the company to achieve net profit of 74.3/84.8/8.92 billion yuan from 2024 to 2026, EPS of 0.89/1.01/1.07 yuan, respectively, and PE valuations corresponding to the current price of the company's stock to be 6 times, 5 times, and 5 times, respectively, maintaining a “buy” rating.
Risk warning
There are risks such as natural resources, subsidies, new installations, utilization rates, and feed-in tariffs falling short of expectations, and impairment charges exceeding expectations.