Core views
In 2023, the company achieved operating income of 8.091 billion yuan, a year-on-year decrease of 23.85%; realized net profit to mother of 1,226 billion yuan, a year-on-year decrease of 61.80%. In terms of total profit, thermal power, hydropower, wind power, and photovoltaics achieved profits of -150 million yuan, 1,316 million yuan, 314 million yuan, and 86 million yuan respectively, with year-on-year changes of +121 billion yuan, -2,811 billion yuan, +0.42 billion yuan, and +40 billion yuan. The 24Q1 company achieved operating income of 2.130 billion yuan, an increase of 6.77% over the previous year; realized net profit of 430 million yuan, an increase of 46.04% over the previous year, mainly due to the increase in the amount of electricity generated by thermal power with marginal benefits combined with the year-on-year increase in wind power. We expect the company's net profit from 2024 to 2026 to be 2,829 billion yuan, 3,055 billion yuan, and 3.239 billion yuan respectively, corresponding to EPS of 0.36, 0.39, and 0.41 yuan/share, respectively, maintaining a “buy” rating.
occurrences
The company released the 2023 annual report and the 2024 first quarter report. In 2023, the company achieved operating income of 8.091 billion yuan, a year-on-year decrease of 23.85%; realized net profit of 1,226 billion yuan, a year-on-year decrease of 61.80%; realized net profit deducted from non-return to mother of 1.01 billion yuan, a year-on-year decrease of 62.73%; the weighted average return on net assets was 6.93%, a year-on-year decrease of 12.71 percentage points; and basic earnings per share was 0.14 yuan/share, a year-on-year decrease of 63.48%. In the first quarter of 2024, the company achieved operating income of 2.130 billion yuan, up 6.77% year on year; realized net profit of 430 million yuan, up 46.04% year on year; weighted average return on net assets of 2.55%, up 0.94 percentage points year on year; basic earnings per share was 0.0518 yuan/share, up 48.42% year on year.
Brief review
The year-on-year decline in hydropower intake in 2023 dragged down revenue performance. In 2023, the company achieved operating income of 8.091 billion yuan, a year-on-year decrease of 23.85%, of which main business revenue was 8.048 billion yuan, a year-on-year decrease of 23.84%. The change in main business revenue was mainly due to the fact that the company's Guangxi hydropower basin had dried up 5-6 percent of incoming water, and a sharp decrease in electricity sales volume over the same period last year; achieved net profit of 1,226 billion yuan, a year-on-year decrease of 61.8%, mainly due to a decline in hydropower business profit. The company achieved total profit of 1,580 billion yuan in 2023, a decrease of 2,626 billion yuan compared with the same period last year. Specifically, thermal power achieved profit of 150 million yuan, a year-on-year loss of 121 million yuan; hydropower achieved profit of 1,316 billion yuan, a year-on-year decrease of 2,811 million yuan; wind power achieved profit of 314 million yuan, an increase of 42 million yuan; photovoltaics achieved profit of 86 million yuan, an increase of 40 million yuan; and other sources achieved profit of 0.13 billion yuan, a year-on-year decrease of 0.18 million yuan.
In 2023, the company's rate for the period was 11.45%, an increase of 1.62 percentage points over the previous year. Among them, the management rate was 4.41%, an increase of 1.30 percentage points over the previous year, mainly due to the decline in current operating income; the financial rate was 7.04%, an increase of 0.32 percentage points over the previous year. The company actively sought preferential loans to optimize the debt structure and reduce financial expenses. In 2023, the net cash flow from the company's operating activities was 4,079 billion yuan, down 38.16% year on year, mainly due to a decrease in cash income due to a decrease in operating income; net cash flow from investment activities was 3.633 billion yuan, a decrease of 1.68% year on year, which is basically the same as the previous period.
2024Q1 resonance due to multi-cause resonance, year-on-year improvement in performance
In the first quarter of 2024, the company achieved operating income of 2,130 billion yuan, an increase of 6.77% over the same period last year; realized net profit of 430 million yuan, an increase of 46.04% over the same period last year; realized net profit of 419 million yuan without return to mother, an increase of 42.89% over the previous year, mainly due to additional electricity generated by thermal power with marginal benefits. Wind power increased year-on-year, leading to a year-on-year increase in net profit. The weighted average return on net assets was 2.55%, up 0.94% year on year; basic earnings per share were 0.0518 yuan/share, up 48.42 percentage points year on year, mainly due to the increase in the company's profit. The company's management rate and finance rate were 3.10% and 6.69%, respectively, a year-on-year decrease of 0.3 and 0.73 percentage points.
New energy installations continued to grow, and hydropower generation decreased year-on-year.
As of December 31, 2023, the company's installed capacity reached 1.30216 million kilowatts, of which the hydropower, thermal power, wind power and photovoltaic installations were 10.234 million kilowatts, 791,700 kilowatts, and 664,500 kilowatts respectively, accounting for 78.60%, 10.21%, 6.08% and 5.10% respectively. The total installed capacity of the company's new energy was 1.4562 million kilowatts, an increase of 47.82% over the previous year. In 2023, the company completed power generation of 28.507 billion kilowatt-hours, a year-on-year decrease of 31.37%. Among them, hydropower, thermal power, wind power and photovoltaics generated 21.101 billion kilowatt-hours, 5,013 billion kilowatt-hours, 1,841 million kilowatt-hours, and 552 million kilowatt-hours, respectively, a year-on-year change of -41.50%, +44.88%, +2.22%, and +169.27%. The company's sharp year-on-year decline in hydropower generation was mainly affected by a 5-6 percent drop in incoming water from the Hongshui River basin compared to previous years and the arid climate in the southwest region. The company's hydropower generation in Sichuan, Yunnan, and Guizhou declined to varying degrees over the same period last year. The company's photovoltaic power generation achieved year-on-year growth, mainly due to the year-on-year increase in the company's photovoltaic installed capacity.
The company completed a cumulative total of 7.109 billion kilowatt-hours of power generation in the first quarter of 2024, a year-on-year decrease of 1.20%. Among them, hydropower, thermal power, wind power, and photovoltaics generated 5,097 billion kilowatt-hours, 1,196 million kilowatt-hours, 664 million kilowatt-hours, and 152 million kilowatt-hours, respectively, with year-on-year changes of -7.38%, +8.83%, +28.19%, and +102.67%. The year-on-year decline in the company's Q1 hydropower generation was mainly due to the fact that incoming water from the Hongshui River basin was 30% dry compared to the average over the years, resulting in a decline in power generation. Combined with poor incoming water in areas where hydropower plants are located in Yunnan and Guizhou, power generation declined to varying degrees over the same period last year.
Incoming water during the 2024 flood season is worth looking forward to, maintaining a “buy” rating.
As of April 15, 2024, the water level of Longtan Reservoir was 342 meters, compared to 341 meters in the same period last year. The company overcame the effects of poor intake water in Q1 and maintained a good water storage level. Considering the low base in 2023, we believe that the company's hydropower sales volume is expected to increase in 2024, which will contribute positively to the company's performance.
Furthermore, the company's thermal power business is expected to benefit from falling fuel prices, and profitability is expected to continue to recover. We expect the company's net profit from 2024 to 2026 to be 2,829 billion yuan, 3,055 billion yuan, and 3.239 billion yuan respectively, corresponding to EPS of 0.36, 0.39, and 0.41 yuan/share, respectively, maintaining a “buy” rating.
Risk analysis
Climate risk: Hydropower is the company's dominant power generation position. Incoming water from various hydropower basins is greatly affected by climate change, and wind power and photovoltaics are also greatly affected by the local climate. The company's hydroelectric power units in service are distributed in different watersheds in Guangxi, Sichuan, Guizhou and other provinces. The geographical location varies greatly. Climate change and unstable incoming water will have an impact on the company's power generation.
Coal price fluctuation risk: Due to various uncertainties such as domestic and international coal supply and demand changes, changes in the international situation, policy changes, and transportation conditions, market coal prices still fluctuate, which in turn has an impact on the company's thermal power profitability.
Market demand risk: Electricity demand will fluctuate with economic fluctuations. As marketization deepens, electricity prices are more clearly affected by the relationship between supply and demand, which affects enterprise efficiency.