Electricity prices were raised and costs were optimized, and Q1 net profit returned to mother increased 17% year over year. In 2023, Sichuan Hydropower Company also reported that the company achieved operating income of 23.461 billion yuan (-0.51% YoY), net profit to mother of 7.638 billion yuan (YoY +5.58%), 24Q1 revenue of 4.420 billion yuan (YoY +3.58%), and net profit to mother of 1,065 billion yuan (+17.3% YoY). In 2023, electricity consumption declined and electricity prices increased, and operating income remained basically flat; financial expenses were reduced by 450 million yuan through loan replacements (comprehensive financing costs in '23 were 3.07%, down 0.6%), which led to an increase in net profit to mother.
2024Q1 achieved revenue growth in the face of declining electricity consumption, and electricity prices are expected to increase significantly.
The amount of electricity used up from incoming water has declined, and the fluctuation in electricity prices in the province will continue. Energy storage in reservoirs was low in early 2023, and electricity prices in reservoirs were reduced by 4% year on year. Electricity prices in Yunnan Province fell by 4% year on year in 2023 due to policy restrictions, but in 2022 the company's electricity prices were lower due to changes in electricity structure. Hydropower prices increased 4.2% year on year in 2023. Electricity prices decreased after affordable photovoltaic projects were connected to the grid, and the average feed-in electricity price increased 3.0% year on year. In 2024, due to new energy squeezing and reservoir peak diversion, the company's power generation capacity fell 7.2% year on year, but energy storage was 4.4 billion kilowatt-hours higher year over year, opening up room for electricity prices to rise in Yunnan Province, and electricity prices are expected to continue to rise under tight supply and demand.
The hydropower plant is about to be put into operation, and the photovoltaic project continues to be connected to the grid. The company currently has 25.6 GW of hydropower installed, the Toba Power Station (1.40 GW) is expected to be put into operation in 24, and the Jiaoliangbao Hydropower Station (1.11 GW) is expected to be put into operation in 25. The company's hydropower installed capacity will reach 28.11 GW when fully put into operation. At the same time, the company still has hydropower reserves in the upper reaches of the Lancang River. According to the company's investment announcement, the company plans to install 10 GW of photovoltaic installations around the watershed, and put into operation an additional 1.31 GW in 2023, with a photovoltaic power generation capacity of 1,391 billion kilowatt-hours. As module prices fall, the company's photovoltaic construction is expected to accelerate.
Profit forecasting and investment advice. The company's net profit from 2024 to 2026 is estimated to be 87.8/101.7/11.60 billion yuan, respectively, and the PE corresponding to the latest closing price is 19.4/16.8/14.7 times, respectively. The power plant is about to be put into operation, electricity prices continue to rise, and PV production is accelerating. Referring to peer valuation, the company was given 20 times PE in 24 years, corresponding to a reasonable value of 9.76 yuan/share, maintaining a “buy” rating.
Risk warning. Fluctuations in incoming water; risk of feed-in tariff adjustments; PV construction falling short of expectations, etc.