Incident: The company recently released the 2023 annual report and the performance forecast for the first quarter of 2024. In 2023, the company achieved operating income of 40.504 billion yuan, +7.94% year over year; net profit attributable to mother/ net profit after deduction of 20.46/ 2.63 billion yuan, respectively, -6.94%/3.11% YoY; net cash flow from operating activities was 11.930 billion yuan, +23.95% year over year. In the first quarter of 2024, the company expects to achieve net profit of 962-1,250 million yuan, +51.65% -97.15% year-on-year.

The fall in coal prices has driven the restoration of gross margin, and net profit returned to mother under pressure due to large deductions and depreciation. In 2023, the company achieved operating revenue of 40.504 billion yuan, +7.94% over the same period, mainly due to the company continuing to step up the development of new projects and steadily advancing construction, adding 1.679 million kilowatts of installed capacity throughout the year, and electricity sales increased year-on-year; at the same time, it continued to strengthen electricity marketing, and power plants in Guangdong Province signed a long-term agreement price increase. The company's gross margin in 2023 was 22.55%, +5.20pct year on year. The main reason was that the company seized the opportunity of falling coal prices to effectively reduce fuel costs. In 2023, the company's gross margin for coal-fired power generation was 11.76%, +18.06 pct year on year. In 2023, the company achieved net profit of 2,046 billion yuan, or -6.94% over the same period. In 2023, the company calculated bad debt impairment provisions and asset impairment provisions for 17 projects with accounts receivable recovery risks totaling 1,413 billion yuan. The company's total annual credit impairment losses and asset impairment losses amounted to 2,241 billion yuan, an increase of 1,972 billion yuan over 2022.

Continue to strengthen the development of new energy projects, 2

A total of 1,518,900 new nuclear preparation projects were added in 2008

kW. In 2023, the company will continue to anchor a green and low-carbon development path, continue to increase the development strength and breadth of new energy projects such as wind power and photovoltaics, promote organic linkage between old and new energy development, and actively explore new business formats in the field of renewable energy, and explore and develop new projects in the fields of flexible transformation of thermal power plants to support new energy, hydrogen production from agriculture and light, integrated optical storage, and distributed wind power. In 2023, the company's new energy nuclear preparation projects totaled 1,518,900 kilowatts, including the 450,000 kilowatt integrated fire storage project in Shenzhen Yuli County, the 505,000 kilowatt wind and solar hydrogen synthesis project, the Nanchang Lianyu 50,000 kilowatt decentralized wind power project, the Yunnan Luquan 160,000 kilowatt photovoltaic photovoltaic project, the Xuzhou Chahe Town 50,000 kilowatt integrated fishing light project, and a total of 14 new energy projects, including the 32,200 kilowatt rooftop photovoltaic project at Shenzhen Airport.

Profit forecast: Maintaining the company's “buy” rating. We expect that in 2024-2026, the company will achieve operating income of 430.57/455.13/47.853 billion yuan, and net profit to mother of 28.63/35.06/3,930 billion yuan respectively, and corresponding PE of 11.85x/9.68x/8.63x, respectively.

Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, the impact of fluctuations in coal and natural gas prices, construction of new energy projects falls short of expectations, profit forecasts and valuation models fall short of expectations