Incident: The company released its 2023 annual report, achieving annual revenue of 117.18 billion yuan, +9.5% year over year; net profit to mother of 4.52 billion yuan, +3789.0% year over year.
The volume of coal trade increased, new units were put into operation, and the company's revenue was +9.5%. In '23, the company achieved revenue of 117.18 billion yuan, +9.5% year-on-year. Among them, in terms of electricity, the company added 3696 MW of installed capacity put into operation in '23, including 3190 MW of coal-fired generator sets and 506 MW of gas generators. The annual power generation business achieved revenue of 96.15 billion yuan. In terms of coal, due to the increase in coal trade volume, the company's coal sales business achieved operating revenue of 10.6 billion yuan, +610% over the same period last year.
Electricity prices, electricity volume, and coal prices resonate with multiple factors, improving profitability. In '23, the company achieved feed-in power of 209.5 billion kilowatt-hours, +1.21% year-on-year; the average feed-in price was 516.78 yuan/megawatt-hour, -0.43% YoY, which is basically the same as the full year of '22. In terms of coal prices, the average price of coal in 5,500 kcal ports in '23 was 965 yuan/ton, -24% compared with the same period last year. Driven by a sharp drop in thermal coal prices, the gross profit margin of the company's power generation business was 8.7%, +6pct year on year, and profitability improved markedly. Electricity prices, electricity volume and coal prices have multiple resonances. The company achieved net profit of 4.52 billion yuan, +3789% year over year, and net cash flow from operating activities of 13.25 billion yuan, +37.2% year over year.
Huadian New Energy is growing steadily, and falling coal prices are dragging down investment returns in the coal sector. Huadian Xinneng's installed capacity grew rapidly, contributing 2.95 billion yuan in investment income in 23 years, an increase of 13.7% over the previous year. We expect Huadian Xinneng's installed capacity to exceed 80GW by 2026, which is expected to contribute more than 5 billion yuan in investment income to the company. Also, due to falling coal market prices, coal joint ventures contributed to a decline in investment income. The company achieved overall investment income of 3.78 billion yuan in '23, or -21.4% year-on-year.
The annual cash dividend ratio is 43.7%. The company announced its 23-year profit distribution plan, stating that it will distribute a cash dividend of 0.15 yuan per share, for a total of 1,534 billion yuan in cash dividends. After deducting interest on perpetual bonds, the annual cash dividend ratio reached 43.7%.
The year-on-year decline in coal prices for the year was higher than expected, and coal trade volume and profitability exceeded expectations. We raised the company's 24-25 profit forecast. The net profit attributable to the parent company for 24-26 was 71.81/79.35/9.117 billion yuan, respectively (the previous 24-25 forecast value was 64.97/7.149 billion yuan), and corresponding earnings per share were 0.70/0.78/0.89 yuan, respectively (the previous 24-25 forecast value was 0.64/0.70 yuan). Referring to comparable company valuations, the company was given an 11-fold PE valuation in 2024, corresponding to a target price of 7.70 yuan, maintaining a “buy” rating.
Risk warning
Risk of falling electricity prices; risk of demand for thermal power falling short of expectations; risk of market coal price fluctuations; risk of falling short of expectations in the Changxie coal policy; risk of fluctuations in investment returns.