Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 10.513 billion yuan, a year-on-year increase of 18.93%, and realized net profit of 741 million yuan, an increase of 1.65% over the previous year, and plans to pay a cash dividend of 0.35 yuan (tax included) per share; 2024Q1 achieved operating income of 2,900 million yuan, an increase of 31.44% year on year, and achieved net profit of 186 million yuan, a year-on-year decrease of 15.61%.
Revenue from engineering services and thermal power operations has increased rapidly, and equipment manufacturing is under phased pressure. (1) The company is actively developing new energy photovoltaic power plant construction and municipal environmental protection engineering business. In 2023, power plant engineering and service revenue increased 46.80% year-on-year to 2,225 billion yuan, and the effective order amount for new PV power plants was 1,714 billion yuan; in 2023, municipal environmental protection engineering and service revenue increased 12.37% year-on-year to 2,099 billion yuan, with new orders of 3.2 billion yuan. (2) With the completion of the company's controlling acquisition of 3 thermoelectric companies including Puyuan Thermal Power and the commissioning of the company's self-built Ninggao combustion engine project, the company's thermal power sales volume increased 20.89% year on year to 8.1788 million tons in 2023, driving the operating revenue of the thermal power and photovoltaic power plant operating sector to increase 42.72% year on year to 3,979 billion yuan. (3) Affected by macroeconomic sentiment, energy saving and carbon reduction policies, the company's equipment manufacturing revenue fell 24.37% year on year to 1,499 billion yuan, of which the gross margin of environmental protection equipment decreased by 8.17 pcts to 14.53% year on year.
2024Q1's revenue continued to grow rapidly. The main contribution came from the thermoelectric operation business, but fierce competition in the boiler equipment market caused the company's gross margin to decrease by 3.72 pcts to 16.08% year on year. The company expects to achieve operating revenue of 11.5 billion yuan and total profit of 1.18 billion yuan in 2024.
Environmental operation capacity continues to increase, and breakthroughs have been achieved in overseas markets for energy equipment. The company's environmentally friendly operating capacity has been rising steadily. By the end of 2023, the domestic waste incineration/kitchen/sludge production capacity in operation reached 3300/440/2,640 tons/day, respectively. The company actively laid out overseas markets, achieved overseas orders of 450 million yuan in 2023, made a breakthrough in the combustion engine preheating boiler project, successfully obtained the Harbin Electric International Uzbekistan 2x9H (1600MW) combustion engine waste heat boiler project, and signed the Harbin Electric International Mexico Manzanillo Phase III 7FA waste heat boiler project contract, entering the North American region for the first time.
Promote hydrogen energy electrolyzer and thermal power flexibility transformation business in a steady and orderly manner. (1) The 1500nm3/h alkaline electrolyzer, which the company launched in April 2023, is at the leading level in the industry in terms of hydrogen production pressure and unit energy consumption. It was shortlisted in November 2023 on the list of qualified suppliers for construction of alkaline electrolyzers, and is expected to receive orders for alkaline electrolyzers in the future. (2) The “flexible low-nitrogen high-efficiency coal-fired boiler” technology and products jointly developed by the Company and the Institute of Engineering Thermophysics of the Chinese Academy of Sciences are being tested at the company's own Huilian Power Plant and have now entered commissioning and operation.
Maintaining a “buy” rating: Competition for environmental operations and equipment sales intensified, and we lowered our profit forecast performance. We expect the company to achieve net profit of 7.89/9.08/1,002 billion yuan in 2024-26 (22% down/ 20% down/increase). The current stock price is 13 times PE in 24 years. The company's forward-looking layout for the manufacture and sale of alkaline electrolyzer equipment is expected to become a new performance growth point for the company in the context of rising domestic and overseas demand for green hydrogen. Combined with the performance contributions brought by the thermal power flexibility transformation business volume, it maintains a “buy” rating.
Risk warning: The construction of thermal power and photovoltaic power plants fell short of expectations; the signing of orders and sales of alkaline electrolyzers fell short of expectations.