Incident: The company released its report for the first quarter of '24. 2024Q1 achieved operating income of 65.367 billion yuan, +0.15% year-on-year, and net profit to mother of 4.596 billion yuan, +104.25% year-on-year.
In 24Q1, feed-in electricity volume increased 5.63% year over year, and average settlement feed-in tariff decreased by 3.99% year on year. The company's operating power plants in China completed feed-in capacity of 113,036 billion kilowatt-hours according to the consolidated report, an increase of 5.63% over the previous year; among them, the feed-in electricity capacity of coal engine/ gas engine/ wind power/ photovoltaic/hydropower/ biomass energy was 922.67/71.54/100.28/32.22/1.83/182 million kilowatt-hours, respectively, +3.05%/-1.73%/+24.08%/+73.73%/+186.40%/-6.15%. The average online settlement price for power plants operating in China was 497.97 yuan/megawatt-hour, a year-on-year decrease of 3.99%.
The price cost of imported standard coal has dropped significantly, and profits from coal and electricity have improved drastically marginally. On the cost side, the average price of 23Q1/24Q1 in Qinhuangdao (Q5500, liquidation price, last coal) was 1129/902 yuan/ton, respectively, or -20.12% in 24Q1; the share of green electricity feed-in electricity in the entire market is gradually increasing, catalyzing the demand for auxiliary thermal power services, so the electricity and coal consumption of the company's coal machines is expected to rise slightly. On the revenue side, the company's overall feed-in price has declined, but coal power opened the capacity electricity price market in '24, providing stable revenue for coal-fired power plants. We judge that the change in the comprehensive feed-in tariff for thermal power (electricity price+capacity electricity price) was limited year-on-year. The company's coal power unit's profit improved sharply year on year due to falling coal prices. In 2024Q1, the company achieved a total profit of 2,825 billion yuan, reversing losses over the previous year, and the corresponding electricity profit was 0.031 yuan/kilowatt-hour.
Benefiting from a sharp increase in wind power and photovoltaic installations, this corresponds to an increase in overall profits. The company's 24Q1 new energy installation accelerated. The number of new wind power/photovoltaic installations was 869.05/736.8 MW respectively. As of 24Q1, the installed capacity of wind power/photovoltaics was 1638/13.84 million kilowatts, respectively, up 19.21%/87.95% year on year; during the same period, feed-in electricity increased 24.08%/73.73% year on year, respectively. Therefore, we judge that the number of hours used for wind power increased year-on-year, and that the reduction in the number of hours used by photovoltaics was quite obvious. On the profit side, the total profit of 2024Q1 wind power/photovoltaics was 2,414/370 million yuan respectively, up 25.41%/6.99% year-on-year respectively. We believe that the decline in PV feed-in prices and a slight increase in the light disposal rate are the main reasons why its profit growth rate is significantly lower than the growth rate of its feed-in electricity.
Profit forecast, valuation and rating: Taking into account 1) the sharp drop in thermal coal prices, the company's thermal power profitability improved significantly in Q1 in '24; 2) the company's green power (wind power, photovoltaic) continued expansion; based on the current market thermal coal price level, we raised the company's 2024E-2026E net profit to 163.66/167.29/17.048 billion yuan (previous value was 120.86/135.41/14.8878 billion yuan), corresponding to EPS of 1.04/1.07/1.09 yuan, respectively PE is 9/9/9 times. Based on: 1) the continuous decline in coal prices and costs, 2) the determination of the new energy transformation trend, and 3) the significant improvement in cash flow, we maintain the company rating as “buy”.
Risk warning: Demand for terminal electricity has declined; the progress of the transformation of new energy sources has fallen short of expectations; the implementation of the Coal Price Cooperation has fallen short of expectations; and the installed costs of wind power and photovoltaics have increased dramatically.