Incidents:
The company released the “Report for the First Quarter of 2024”. 2024Q1 achieved operating income of 65.367 billion yuan, +0.15% year-on-year, and realized net profit to mother of 4.596 billion yuan, +104.25% year-on-year. The performance exceeded expectations.
Thermal power: Higher demand for electricity combined with lower coal prices contributes to profits
2024M1-M3 The cumulative electricity consumption of the entire society was +9.8% year-on-year, and electricity demand was high to guarantee power generation on the power generation side. The company's Q1 coal engine and gas engine feed-in electricity volume was +3.05% and -1.73%, respectively. In terms of coal prices, according to wind data, Qinhuangdao (Q5500, liquidation price) was selected. The average price for 2023Q1/2024Q1 was 1128.9/901.7 yuan/ton, respectively. The decline in coal prices contributed to profit. The 2024Q1 company achieved a profit of 2,825 billion yuan for coal combustion, reversing losses over the previous year, and the electricity profit was 0.031 yuan/kWh.
New energy: increased power generation, faster installed capacity
Benefiting from the increase in new energy installed capacity in 2023 and a high increase in power generation, 2024Q1 wind power/photovoltaic feed-in power increased 24.08%/73.73% year-on-year respectively. Reflected on the profit side, the total profit of 2024Q1 wind power/photovoltaics was 2,414/370 million yuan respectively, an increase of 25.41%/6.99%, respectively. Benefiting from the decline in new energy installed costs, the company's 2024Q1 new energy installation accelerated, and 2024Q1's new wind power/photovoltaic installations were 869.05/736.8 MW, respectively.
Capacity+auxiliary services+cost improvements promote the growth of thermal power performance. The scale of green power continues to increase electricity consumption and guarantees a higher number of hours of thermal power utilization. At the same time, the capacity price gives stable income to thermal power. At the same time, thermal power has adjustable power properties. In 2023, the company's net revenue from peak-shifting/FM electricity costs was 22.23/495 million yuan respectively, and revenue related to ancillary services is expected to increase in the future. The scale of the company's new energy installed capacity continues to rise. After entering market-based trading, the price of affordable new energy electricity may be under pressure. The average domestic Internet settlement price of 2024Q1 is 0.49,797 yuan/kWh, -3.99% compared to the same period. However, as the cost of new energy decreases and the green power environment premium increases, the price of new energy electricity is expected to stabilize, and the comprehensive income is expected to increase.
Profit Forecasts, Valuations, and Ratings
We expect the company's 2024-2026 revenue to be 2558.4/2605.3/261.55 billion yuan, respectively, with year-on-year growth rates of 0.57%/1.84%/0.39%, net profit to mother of 131.3/144.6/17.98 billion yuan, year-on-year growth rates of 55.44%/10.12%/24.38%, EPS of 0.84/0.92/1.15 yuan/share, respectively, and a 3-year CAGR of 28.64%. Since the company is a leading thermal power company, based on comparable company valuations, we gave the company 13 times PE in 2024, with a target price of 11 yuan, maintaining a “buy” rating.
Risk warning: electricity prices fluctuate, installation progress falls short of expectations, coal prices fluctuate