2023/1Q24 net profit to mother +18%/+1.2% YoY, increase target price
China Nuclear Power released its annual report and quarterly report. In 2023, it achieved revenue of 75 billion yuan (+5% YoY), net profit to mother of 10.6 billion yuan (+18% YoY), and net profit of 10.4 billion yuan after deducting non-net profit (+15% YoY). Net profit to mother was better than our previous forecast (10.3 billion yuan). 1Q24 achieved revenue of 18 billion yuan (+0.5% YoY), net profit of 3.1 billion yuan (YoY +1.2%), deducted non-net profit of 3 billion yuan (YoY +0.9%), 1Q24 nuclear power volume declined year on year, and new energy generation continued to grow at a high rate. Refer to the 2023 and 1Q24 operating data changes, and lower gross margin and management expense ratios; increased capital expenditure increases financing requirements and raised financial expense ratios. We expect the company's 2024-2026 EPS to be 0.62/0.68/0.71 yuan respectively (previous value: 0.61/0.70/- yuan). Comparable company Wind agreed to expect an average PE value of 17 times in 2024, giving the company 17 times PE in 2024, with a target price of 10.54 yuan (previous value of 8.54 yuan). Maintain a “buy” rating.
Nuclear power: Construction was accelerated in 2024/2025, and at the peak of production in 2026/2027, the company had 25 nuclear power carriers at the end of March 24, with an installed capacity of 23.75 GW, and achieved a power generation capacity of 1,865/43.7 billion kilowatt-hours (+0.7%/-3.1%) in 2023/1Q24, with an average utilization time of 7,852/1,839 hours; 1Q24, some Qinshan/Fuqing nuclear power units were overhauled, and electricity volume decreased 6.3%/10.8% year on year. There is still time to be added to nuclear power. As of the end of March '24, the company had a total of 11 machines under construction, with an installed capacity of 12.63 GW; 4 units to be built were approved, with an installed capacity of 4.93 GW.
The company's nuclear power capacity under construction and to be built is equivalent to 74% of the operating capacity. Considering the long construction cycle of nuclear power projects, 2024/2025 is a small cycle for the company's nuclear power production (we expect to put into operation 1 unit per year), and nuclear power production is expected to accelerate in 2026/2027 (we expect to put into operation 3 units per year).
New energy: The pace of commissioning is expected to accelerate. It is planned to release REITs to revitalize existing assets by the end of March '24, with 21.34 GW of new energy in operation (14.01 GW+ 7.33 GW of wind power) and 14.26 GW (10.92 GW of photovoltaics and 3.34 GW of wind power) under construction. With prices in the upstream PV industry chain falling sharply, we are optimistic about the scale of the company's installed capacity to be put into production in 24.
In 2023/1Q24, new energy generation reached 234/74 billion kilowatt-hours (+66%/+61% year-on-year), and the net profit from green power reached 19% in 2023. CNNC Huineng plans to promote the issuance of green power and meter-type REITs and raise capital of no more than 7.5 billion yuan, with a total installed capacity of 1.12 GW of underlying assets. If it is successfully issued, we believe it can reduce the company's balance ratio and revitalize existing assets.
Risk warning: Project commissioning falls short of expectations; risk of falling electricity prices.