Net profit due to mother in 2023 -6.9% YoY; profit forecast and target price increased
Zhongmin Energy released its annual report. In 2023, it achieved revenue of 1.73 billion yuan (-3.3% YoY), net profit of 678 million yuan (YoY -6.9%), net profit after deducting non-net profit of 651 million yuan (-10.2% YoY), and net profit to mother lower than Huatai's forecast (753 million yuan), mainly due to lower revenue than expected. Among them, Q4 achieved revenue of 626 million yuan (+2.2% YoY) and net profit to mother of 294 million yuan (+6.4% YoY). Based on the company's 2024 business plan and wind resource improvement expectations, the number of wind power hours was raised; based on the increase in profit forecasts, we expect the company's EPS for 2024-2026 to be 0.45/0.46/0.48 yuan (previous value: 0.42/0.44/- yuan), respectively. The majority shareholders' two high-quality assets (Pinghai Bay Offshore Wind Power Phase III and Yongtai Savings) are expected to meet the prerequisites for asset injection, win new bids for offshore wind power projects, and drive the company's medium- to long-term performance growth. Comparatively, Wind agreed to expect an average PE value of 13 times in 2024, giving the company 13 times PE in 2024, with a target price of 5.85 yuan (previous value 5.6 yuan), maintaining a “buy” rating.
There is no change in the installed capacity of the generator in the short term, and wind resources directly affect profit performance
As of the end of 2023, the total installed capacity of the company connected to the grid was 957,300 kilowatts, with no change over the previous year; of these, 611,300 kilowatts of onshore wind power and 296,000 kilowatts of offshore wind power. In 2023, the net profit of offshore wind power in Fujian was +4%, the net profit of Fujian onshore wind power was -25%, and the net profit of wind power in Heilongjiang was +131% year-on-year. The size of the incoming wind is one of the core variables affecting the company's performance. In 2023, the company's onshore and offshore wind power utilization hours in Fujian were 2,744/3,905 hours (-584/-133 hours year on year), below/above the Fujian provincial wind power average (2,880 hours); the company's Heilongjiang wind power utilization hours were 2,443 hours (-75 hours year over year), lower than the average of wind power in Heilongjiang Province (2,538 hours).
The Group's assets meet the prerequisites for injection, and reserve funds are used for investment in mergers and acquisitions
Fujian Investment Group, the majority shareholder, promised during the major asset restructuring of Zhongmin Energy in 2019 that the prerequisites for the relevant assets under the Group to initiate asset injection include: 1) stable commissioning; 2) achieving profit within a full fiscal year; and 3) no compliance issues. The Group's Pinghai Offshore Wind Power Phase III project was put into operation at the end of '21 and has met these prerequisites. The Group's Yongtai Savings Project has 4 units with a total of 1.2 GW. It was put into full capacity to generate electricity on March 28, 2023. We expect to meet the injection conditions in 24 years. The company's cash dividend ratio in 2023 was less than 30%, and the remaining undistributed profit at the end of the period was +58% to 1.28 billion yuan. In the future, it will mainly be used for the company's new project investment and construction, mergers and acquisitions, and daily operations.
Risk warning: construction of new projects is lagging behind; subsidy verification results are lower than expected; new project acquisition falls short of expectations.