Description of the event

The company released its 2024 quarterly report: The company achieved operating income of 3,088 billion yuan in the first quarter of 2024, an increase of 0.52% over the previous year; realized net profit of 526 million yuan, a decrease of 1.14% over the previous year.

Incident comments

Weak demand is under pressure, and rising electricity prices guarantee stable income. Weak incoming wind continued to have an impact. In the first quarter of 2024, the company's wind power generation capacity was 1,495 billion kilowatt-hours, a year-on-year decrease of 10.43%; in terms of thermal power, the first quarter's thermal power generation capacity was 3.814 billion kilowatt-hours, up 8.32% year on year, of which gas and electricity generation capacity was 646 million kilowatt-hours, up 57.18% year on year; however, due to weak downstream demand in Fujian Province, the company's combined heat and power generation capacity was 1,144 million kilowatt-hours, a year-on-year decrease of 19.83%; pure coal-fired power generation capacity increased by 19.83% year on year 20.26% It is worth noting that in August 2023, Fujian Province raised the gas and electricity feed-in price by 0.0399 yuan/kilowatt-hour, so the gas and electricity business will achieve a sharp rise in volume and price compared to the first quarter of last year. In addition, the company's heating capacity reached 2.081 million tons in the first quarter, an increase of 13.22% year on year. The sharp increase in heating supply will also ease the pressure on the company's revenue side due to the year-on-year decline in thermoelectric power to a certain extent. Driven by a sharp rise in gas and electricity business volume and a sharp increase in the power generation capacity of coal-fired condensing units, the company achieved revenue of 3,088 billion yuan in the first quarter, an increase of 0.52% over the previous year.

Coal prices fell back, and thermal power's profits recovered, and the first quarter results achieved steady performance. Coal prices fell sharply in the first quarter of this year. The average market price of Q5500 thermal coal in Qinhuangdao Port was 901.74 yuan/ton, down 20.1% year on year. The sharp drop in coal prices significantly released the pressure on the company's coal and electricity costs. Although the company's coal-fired power generation in the first quarter increased 8.32% year on year and heat supply also achieved a 13.22% increase, operating costs only increased by 1.73% year on year. The decline in coal prices basically offset the adverse effects of weak incoming wind on the company's overall profit. The company's gross profit for the first quarter was 729 million yuan, a slight decrease of 3.19% year on year. In addition, the company's investment income in the first quarter reached 260 million yuan, an increase of 3.98% over the previous year. The increase in the company's performance of participating in thermal power companies also had an impact on profits due to weak investment in offshore wind power. Overall, driven by the continued recovery in the thermal power business performance, the company achieved net profit of 526 million yuan in the first quarter, a slight decrease of 1.14% over the previous year.

The outlook for performance after the implementation of alternative electricity is positive, and the level of dividends is worth looking forward to. According to the company's announcement, from April to December 2024, Jinjiang Gas and Electricity will transfer 2,1576.3 billion kilowatt-hours of electricity to other power generation companies in the province at a price of 0.3906 yuan/kilowatt-hour (tax included). Compared with only transferring alternative electricity in September 2023, the second quarter of this year will begin to enjoy an increase in the company's profits from alternative electricity, which will further boost the company's performance. In addition, the company proposed in the “2024-2026 Shareholder Dividend Return Plan” that during the planning period, the board of directors of the company can propose that the company pay mid-term dividends based on the company's current profit, cash flow and capital requirements, so there will be room for further improvement in the company's dividends.

Investment advice and valuation: According to the company's latest financial data, we adjusted the company's profit forecast. The company's EPS for 2024-2026 is 1.17 yuan, 1.26 yuan, and 1.43 yuan, respectively, and the corresponding PE is 8.23 times, 7.69 times, and 6.78 times, respectively, maintaining a “buy” rating.

Risk warning

1. The risk of non-seasonal increases in coal prices;

2. The construction progress of the new project falls short of the expected risk.