Incoming water has improved, coal prices have declined, and the landscape has increased, and profits in various sectors have improved markedly. In 2023, the company achieved net profit of 1,749 million yuan (+50.4% year over year), and 2024Q1 achieved net profit of 780 million yuan (+151% year over year). The sharp increase in performance was mainly due to improved hydropower generation from incoming water, lower coal prices, lower fuel costs, and increased wind and solar power generation. In addition, the company plans to transfer 9.58% of Changjiang Securities's shares, and Yingkou can invest 65% of its shares. The transfer prices are 43.43 billion yuan and 156 million yuan respectively. It is expected to increase investment income at one time and return cash to help reinvest.
The amount of water, fire, wind, and electricity has increased, and the 24-year performance is expected to continue to improve. According to the company's electricity volume announcement, since June 23, incoming water from the watershed where the company's hydropower station is located has improved. The annual hydropower generation capacity is 11 billion kilowatt-hours (+10.8% year over year), but it is still more than 2 billion kilowatt-hours lower than 2020-2021. Since the beginning of this year, the water level has been high and incoming water preferences. 24Q1 has a hydropower generation capacity of 3.465 billion kilowatt-hours (+176% year over year); 2 1GW thermal power plants in Xiangyang Yicheng will be put into operation in the second half of 2023, and will contribute to 24Q1 thermal power generation performance. YoY volume +12.5%, Combined with falling coal prices, thermal power profits improved; new energy generation capacity in 2024Q1 was +31.89% year-on-year.
Water, fire, and landscape storage are developed collaboratively, and there is plenty of room for growth. According to the company's official website, the company plans to have a total installed capacity of 22 GW by the end of the 14th Five-Year Plan, including more than 15 GW of renewable energy. According to the company's financial report and the Hubei provincial government, hydropower: Linxi River hydropower is included in the 14th Five-Year Plan of Hubei Province; thermal power: it is proposed to build the second phase of the Jiangling Power Plant 2 x 660 MW project, and the drop in coal prices continues to restore profits; Scenery: Shaanwu DC Phase I 2.1 GW PV has started. Pumped energy storage: The original Luotian Pingtan project has started, and the Changyang Qingjiang and Hubei Nanzhang projects have been commissioned to build the Three Gorges. The total installed capacity is 4.4 GW, and there is plenty of room for diversified growth.
Profit forecasting and investment advice. The company's net profit from 2024 to 2026 is estimated to be 30.2/32.3/3.47 billion yuan, respectively, and the PE corresponding to the latest closing price is 12.3/11.5/10.7 times, respectively.
Profits from thermal power and hydropower continue to recover, and there is plenty of room for growth in new energy+pumped storage. Referring to peer valuation, the company was given a PE valuation of 16 times in 2024, corresponding to a reasonable value of 7.42 yuan/share, maintaining the “buy” rating of Hubei Energy.
Risk warning. Project construction has fallen short of expectations; incoming water has fluctuated; coal prices have risen sharply, etc.