Incident Overview: On April 26, the company released its 2023 annual report. During the reporting period, it achieved operating income of 74.957 billion yuan, an increase of 5.15% over the previous year (as restated); net profit of 10.624 billion yuan, an increase of 17.91% over the previous year (as restated); net profit after deduction of 10.396 billion yuan, an increase of 15.06% year on year (as restated); the company plans to distribute cash dividends of 0.195 yuan per share to all shareholders, with a total cash dividend of about 35.20%. The company released its 2024 quarterly report. During the reporting period, it achieved operating income of 17.988 billion yuan, an increase of 0.53% year on year (as restated); net profit to mother of 3,059 billion yuan, up 1.18% year on year (as restated); net profit after deducting non-return to mother was 3,044 billion yuan, an increase of 0.85% year on year (as restated).
Quarterly maintenance capacity fluctuates, and full-year expectations are worry-free: in 2023, the company's nuclear power generation capacity is 183.5 billion kilowatt-hours; the actual completed power generation capacity is 186.477 billion kilowatt-hours, up 0.67% year on year, 1.6% higher than the annual planned value; in 2024, the company's planned nuclear power generation capacity is 185.1 billion kilowatt-hours. If calculated according to the actual and planned deviation value for 23 years, the company's nuclear power generation capacity is expected to reach 188.1 billion kilowatt-hours, an increase of 0.87% year on year. Due to the year-on-year increase in unit overhauls (Qinshan and Fuqing nuclear power generation decreased by 6.3% and 10.8%, respectively), 1Q24's nuclear power completed 43.674 billion kilowatt-hours, a year-on-year decrease of 3.1%. However, judging from past experience, unit maintenance only disrupted the electricity capacity for a short period of time and Zhangzhou No. 1 is expected to be put into operation in the second half of the year, so there is no need to worry about the implementation of the annual electricity plan.
Financial expenses continued to decline, and management expenses and other income fluctuations: In 2023, the company continued to optimize the debt financing structure through low-interest capital to replace stock debts, etc., and 1Q24 financial expenses decreased by 189 million yuan year on year; at the same time, due to changes in R&D progress, R&D expenses decreased by 175 million yuan year on year in a single quarter, but due to factors such as project commencement, management expenses increased by 116 million yuan year on year during the same period. The company's expenses decreased by 265 million yuan year on year during the Q1 period, but other revenue decreased by 137 million yuan year on year during the same period. Between the increase and decrease in expenses and revenue, the company's operating profit margin increased 0.5 percentage points to 37.6%, and remained stable overall.
Huineng has already “lifted the weight”. The REITs plan revitalized existing assets: in 2023, China Core Huineng, the new energy operating platform, achieved revenue of 9,935 billion yuan, an increase of 51.6% year on year, accounting for a year-on-year increase of 4.1 pct to 13.3%; achieved net profit of 2,941 billion yuan, an increase of 51.6% year on year, accounting for a year-on-year increase of 4.3 pct to 15.2% year on year. By the end of 1Q24, the company's wind power and photovoltaic installations were 733.26 and 140.80 million kilowatts respectively, up 72.3% and 59.1% year-on-year respectively. Among them, the Q1 quarter completed additional installed capacity of 138.11 and 1.4436 million kilowatts respectively. Driven by the rapid expansion of installed capacity, Q1's wind power and photovoltaics generated 37.14 and 3.702 billion kilowatt-hours respectively, with year-on-year increases of 63.3% and 58.1%, respectively. On April 26, the company announced that it plans to use 1.12 GW of new energy as the underlying asset to issue and share REITs to raise no more than 7.5 billion yuan in development capital. The funds raised are intended to be used to repay the external liabilities of underlying assets, mergers and acquisitions of other new energy projects, which will effectively reduce the company's balance ratio, revitalize existing assets, and enhance asset liquidity.
Investment advice: Quarterly fluctuations in nuclear power volume do not affect the annual electricity capacity plan. At the same time, nuclear power performance is growing steadily through additional units and cost reduction; with sufficient funding for construction projects and REITs programs, the pace of wind and light production is expected to accelerate. According to adjustments to the company's profit forecast based on changes in electricity volume, electricity prices, and cost structure, EPS is expected to be 0.59/0.64 yuan for 24/25 (previous value 0.57/0.61 yuan), respectively, and 0.70 yuan for the additional 26 years.
The corresponding closing price PE on April 26 was 15.8/14.6/13.3 times, respectively. Referring to the company's historical valuation level, the company was given 18.0 times PE in 2024, with a target price of 10.62 yuan/share to maintain the “recommended” rating.
Risk warning: 1) nuclear safety incidents; 2) policy changes; 3) electricity price adjustments; 4) exchange losses.