Key points of investment
Incidents:
Guodian Electric Power released its 2023 annual report. For the full year of 2023, the company achieved operating income of 180,999 billion yuan, a year-on-year decrease of 7.02%; net profit to mother was 5.609 billion yuan, up 104.41% year on year; net operating cash flow was 42,584 billion yuan, up 12.84% year on year; and basic earnings per share were 0.314 yuan/share, up 103.90% year on year.
Thermal power sector: Cost-side pressure has been relieved, and sector performance has improved significantly.
In 2023, fuel prices declined steadily. The company made full use of integrated advantages to achieve cost control, and superimposed dividends on rising electricity prices to effectively increase profits. The net profit of the thermal power sector was 8.525 billion yuan, an increase of 127.09% over the previous year. In terms of electricity prices, the average feed-in tariff is 437.78 yuan/megawatt-hour, and the electricity volume participating in market-based transactions is 396.708 billion kilowatt-hours, accounting for 92.29% of feed-in electricity. The premium on market-based electricity prices was 62.63 yuan/megawatt-hour, an improvement of 0.84 yuan/megawatt-hour over the previous year. The price of coal engines and electricity increased 20.66% from the benchmark price. In terms of cost, the continuous release of coal production capacity has effectively improved the supply and demand situation. The company saved costs through comprehensive internal and external regulation. The unit price of standard coal entering the furnace was 934.96 yuan/ton, down 43.82 yuan/ton year on year, down 4.48% year on year. In terms of electricity capacity, thermal power companies have achieved a cumulative total of 372,926 billion kilowatt-hours of power generation and 351,216 billion kilowatt-hours of feed-in electricity, a decrease of 3.97% and 4.17%, respectively, from the previous year; excluding the impact of the transfer of thermal power assets in Ningxia in September 2022, the increase was 3.67% and 3.37%, respectively, over the previous year. In terms of efficiency, the average coal consumption of the company's thermal power generators was 294.19 g/kwh, down 0.89 g/kwh from the previous year. The results of energy saving and consumption reduction were remarkable.
Hydropower sector: Profit margins are expected to expand, supported by installed capacity expansion.
In 2023, the company's hydropower sector achieved net profit of 2,489 billion yuan, an increase of 32.68% over the previous year. In the first half of the year, water storage in major reservoirs was insufficient and precipitation continued to be low, leading to a 5.6% year-on-year decline in the company's hydropower generation capacity. However, the average feed-in price in the hydropower sector was 245.70 yuan/megawatt-hour, up 4.15% year on year, partially offsetting the impact of the decline in power generation output. In 2023, the company maintained its conventional energy development efforts, spending 9.595 billion yuan on hydropower projects, approved 2.807 million kilowatts of hydropower projects, and was constructing about 3.52 million kilowatts of hydropower in the Dadu River basin.
Benefiting from the gradual completion of UHV lines in Sichuan and Chongqing, the hydropower consumption market in the province may improve.
Wind power and photovoltaic sector: The increase in installed capacity reached a record high, and the amount of feed-in electricity was rising steadily.
In 2023, the company's wind power and photovoltaic sector had a net profit of 2,230 million yuan, of which the photovoltaic sector achieved net profit of 743 million yuan, an increase of 166.31% over the previous year. In terms of installed capacity, the company vigorously promoted the development of new energy projects. In 2023, the company increased its installed capacity by 7.2457 million kilowatts, of which wind power increased by 1.834 million kilowatts and solar photovoltaics increased by 5.417 million kilowatts. In addition, the company obtained 16.74 million kilowatts of new energy construction targets throughout the year, 15.288 million kilowatts of nuclear preparation, and started construction of 8.5364 million kilowatts. In terms of electricity volume, wind power companies generated 18.854 billion kilowatt-hours of electricity and 18.214 billion kilowatt-hours of feed-in electricity, up 13.10% and 12.54% respectively from the previous year; photovoltaic companies generated 5.760 billion kilowatt-hours of electricity and 5.748 billion kilowatt-hours of feed-in electricity for the whole year, up 155.74% and 163.38% respectively from the previous year. It is expected that the optimization of the new energy development layout will provide the company with new development momentum.
Profit forecasting and valuation
The company's net profit for 2024-2026 is estimated to be 81.12/92.00/9.734 billion yuan, and EPS is 0.45/0.52/0.55 yuan/share. Based on the closing price on April 23, 2024, the corresponding PE is 10.82/9.54/9.01 times, respectively. Since the company is a leading domestic power generation company and has high dividends and steady growth attributes, the new energy sector is expected to help the company grow its performance and maintain a “buy” rating in the future.
Risk warning
The rise in coal prices exceeded expectations, the improvement in water disposal in the Dadu River fell short of expectations, and the construction of the Shuiguang Project fell short of expectations.