Huadian International released its 2024 quarterly report. In 1Q24, it achieved operating income of 30.952 billion yuan, -3.21% year on year; net profit to mother was 1,862 billion yuan, +64.21% year on year.
Coal prices have declined, and performance has exceeded expectations. Huadian International released its 2024 quarterly report. In 1Q24, it achieved operating income of 30.952 billion yuan, -3.21% year over year; net profit to mother was 1,862 billion yuan, +64.21% year over year. The significant improvement in performance was mainly due to lower coal prices. The company's weighted average return on net assets was 4.03%, +1.52pct year over year.
The decline in electricity volume and electricity prices has dragged down revenue, and industry performance has improved dramatically under coal prices. 1Q24's cumulative power generation capacity was 56.164 billion kilowatt-hours, -0.19%; feed-in electricity was 52,477 billion kilowatt-hours, -0.3% year over year; the average feed-in price was 509.31 yuan/megawatt-hour, -4.1% year on year. The sharp drop in electricity prices led to a year-on-year decline in the company's revenue. Among them, the feed-in electricity capacity for coal/gas/hydropower was 472.95/41.82/997 million kilowatt-hours, respectively, -1.2%/5.7%/24.5% compared with the same period last year. The average price of 5,500 kcal thermal coal in Qingang in 1Q24 was 914.24 yuan/ton, -20.75% year over year. The decline in coal prices led to a significant year-on-year improvement in the company's performance. After deducting investment income, it is estimated that the company's net profit for electricity was about 0.021 yuan/kilowatt-hour (a slight loss in the same period last year), +0.021 yuan/kilowatt-hour compared to the same period last year.
The profit level has improved markedly, and the balance and liability structure continues to be optimized. The gross margin of the 1Q24 company was 8.4%, +4.16pct year on year; the net margin was 7.31%, +3.62pct year on year, and the profit level increased markedly. The management/finance rates were 1.13%/2.74%, respectively, +0.17pct/-0.16pct year-on-year. The company achieved investment income of 1,148 billion yuan, -3.0% year-on-year, and relatively stable investment income provided good support for performance. By the end of March 2024, the company's balance ratio was 60.38%, down 6.05 pcts year on year, down 2.24 pct from the end of 2023, and the balance and liability structure continued to be optimized. The company's net operating cash flow was 4.369 billion yuan, +78.72% year-on-year, and the cash flow situation continued to improve.
Profit forecasting and valuation. Coal prices remained high in the first half of 2023. With coal prices expected to remain low, there is still room for improvement in the company's performance in the first half of 2024. By the end of 2023, the company has been approved and has an assembly capacity of 6.536,800 kilowatts. Continued operation of the project brought high growth; Huadian Group plans to add 75 GW of new energy installed capacity during the 14th Five-Year Plan period, and Huadian New Energy is expected to further contribute to performance growth. Maintain the company's 2024-2026 net profit forecast of 62.88, 69.16, and 7.385 billion yuan, with year-on-year increases of 39.0%, 10.0%, and 6.8%, respectively. The current stock price corresponds to PE of 11.0x, 10.0x, and 9.4x, maintaining the “Overweight” rating.
Risk warning: Higher coal costs than expected, declining profitability of gas and electricity, risk of macroeconomic cyclical fluctuations, risk of electricity price fluctuations, and inadequate installation of new energy sources.