Introduction to this report:
The increase in 1Q24 performance is related to improved expenses and increased return on investment; the company has both steady and growing, and the sustainability of growth is considerable.
Key points of investment:
Maintaining the “gain” rating: The company's growth continues to be impressive, maintaining the 2024-2026 EPS of 0.25/0.26/0.28 yuan, maintaining the target price of 4.76 yuan, and maintaining the “gain” rating.
The performance was in line with expectations. The company's 1Q24 revenue was 19.2 billion yuan, +4.9% year-on-year; net profit to mother was 3.60 billion yuan, +3.4% year-on-year, and the performance was in line with expectations.
Cost improvements combined with increased return on investment led to an increase in the company's 1Q24 performance. The company's 1Q24 holding feed-in capacity was 39.6 billion kilowatt-hours, +0.8% year-on-year; the joint venture's feed-in capacity was 12.2 billion kilowatt-hours, +5.3% year-on-year, mainly benefiting from reduced material replacement and overhauls. The company's 1Q24 gross profit margin was 39.3%, -2.0 ppts year on year; net profit was 5.36 billion yuan, +2.6% year on year. We speculate that the increase in the company's 1Q24 performance was mainly related to cost improvements and increased investment income: 1) 1Q24 R&D expenses rate 0.6%, -0.6 ppts year over year; 2) 1Q24's investment income was 490 million yuan, +16.4% year over year.
Performance constraints have weakened, and the continuation of growth is impressive. The 1Q24 Taishan Nuclear Power feed-in capacity was 6.17 billion kilowatt-hours, +51.4% year-on-year, mainly related to Taishan Unit 1's resumption of grid-connected power generation; we expect Taishan Nuclear Power's performance constraints to weaken, and profits will increase significantly year-on-year due to the base effect. As of the end of March 2024, the company managed a total of 11 units under construction, with a total installed capacity of 13.2 GW. According to the progress of the company's ongoing projects, the company's nuclear power installations grew steadily from 2024 to 2028 (an average of 1 to 2 units are put into operation every year). Furthermore, considering that nuclear power has entered the normalization approval stage, there is still room for improvement in the scale of the company's reserves and installed capacity.
Risk warning: The progress of nuclear power projects is slower than expected, the price of nuclear power is lower than expected, the number of hours used falls short of expectations, the cost of nuclear fuel exceeds expectations, etc.