Description of the event

The company issued an announcement on the electricity situation for the first quarter of 2024: As of March 31, 2024, the company had completed 106.244 billion kilowatt-hours of power generation and 10.690 billion kilowatt-hours of feed-in electricity, up 4.98% and 5.02% respectively over the same period last year, achieving an average feed-in price of 455.58 yuan/megawatt-hour.

Incident comments

Increased electricity volume combined with cost pressure relief, and the main thermal power industry continues to improve. In the first quarter, the company completed feed-in power of 86.023 billion kilowatt-hours, up 4.24% year on year, mainly due to high social demand in Inner Mongolia, Anhui, Fujian and other regions, which led to a year-on-year increase in feed-in power. Among them, Inner Mongolia completed 11.447 billion kilowatt-hours, an increase of 20.64% year on year, and Anhui completed feed-in power of 14.591 billion kilowatt-hours, up 12.56% year on year. In terms of electricity prices, the company achieved an average feed-in tariff of 0.45558 yuan/kilowatt-hour in the first quarter, a slight decrease of 0.007 yuan/kilowatt-hour over the previous year, and electricity prices remained stable. Driven by steady growth in electricity volume, thermal power revenue is expected to maintain strong performance. From the cost side, the coal supply and demand situation in the first quarter tended to ease, and coal prices continued to decline. The average market price of Q5500 thermal coal in Qinhuangdao Port in the first quarter was 901.74 yuan/ton, down 20.1% year on year. The continued decline in coal prices will further increase the profitability of the company's thermal power assets. Overall, the company's business performance in the thermal power sector in the first quarter will continue to improve under the influence of steady growth on the electricity consumption side and the gradual decline in costs.

Incoming water is drying up and the amount of water and electricity is under pressure, and the high increase in green electricity relieves the electricity pressure. In the first quarter, the company's hydropower feed-in capacity was 7.728 billion kilowatt-hours, a year-on-year decrease of 3.22%. The main reason was the continuous droughts in Sichuan Province, where the company's Dadu River is located, rainfall was low, and incoming water continued to be dry. The main reason for the year-on-year decrease in feed-in electricity in the Sichuan region. Although the company's hydropower capacity was significantly pressured by the depletion of incoming water, the amount of new energy feed-in electricity was growing rapidly, driven by the expansion of installed capacity. In the first quarter, the company added 635,500 kilowatts of new energy installed, and controlled 18.47 million kilowatts of new energy. Combined with the influence of 7.2457 million kilowatts last year, the company completed feed-in electricity volume of 5.138 billion kilowatt-hours in the first quarter, an increase of 11.66% over the previous year, and PV completed feed-in power of 1,801 million kilowatt-hours, an increase of 136.26% over the previous year. Overall, although hydropower is being pressured by the depletion of incoming water, the performance of feed-in electricity from new energy sources was excellent. The company's clean energy sector achieved an overall increase of 9.9% year-on-year, providing an important complement to the steady performance of the company's first-quarter results. Overall, the first quarter results of the company's traditional thermal power and clean energy sectors are expected to recover. Although earnings related to the coal business may narrow, the company's performance outlook for the first quarter is positive, driven by steady improvements in main business operations.

Clean energy installations expand to ensure long-term growth space. The company added 635,500 kilowatts of new energy installed in the first quarter, and the holding installed capacity reached 18.47 million kilowatts. In addition, the company has strong reserves for new energy projects. In 2023, the company obtained a total of 16.74 million kilowatts of new energy construction targets and 15.288 million kilowatts of nuclear preparation. Meanwhile, the company still has four units under construction in the Dadu River basin, with a total installed capacity of 3.52 million kilowatts. In the future, as the units under construction are put into operation one after another, the expansion of production capacity will continue to drive an increase in electricity capacity and enhance the certainty of the company's long-term performance growth.

Investment advice: According to the latest operating data, we expect the company's EPS in 2024-2026 to be 0.67 yuan, 0.55 yuan and 0.60 yuan, respectively, and the corresponding PE will be 7.31 times, 8.94 times, and 8.17 times, respectively. Maintain the company's “buy” rating.

Risk warning

1. There is a risk that electricity supply and demand will deteriorate;

2. There is an unseasonal risk in coal prices.