Incident: Power Investment Energy released its 2023 annual report: In 2023, the company achieved operating income of 26.846 billion yuan, a year-on-year increase of 0.20%, net profit to mother of 4.560 billion yuan, an increase of 14.39% over the previous year, and net profit to mother after deduction was 4.338 billion yuan, an increase of 12.27% over the previous year. Basic earnings per share were 2.11 yuan, up 1.93% year on year, and the weighted average return on net assets was 16.24%, down 1.98 pct year on year.
On a quarterly basis, in the fourth quarter of 2023, the company achieved operating income of 7.115 billion yuan, an increase of 9.11% and a year-on-year increase of 2.75%; realized net profit of 975 million yuan, a decrease of 2.71% month-on-month and an increase of 34.18% year-on-year; and realized net profit of 853 million yuan after deduction, a decrease of 10.93% month-on-month and an increase of 26.57% year-on-year.
Comment:
The price of tons of coal bucked the trend, and the cost of tons of coal fell year on year. According to the company's 2023 annual report, 1) Production and sales volume:
In 2023, the company's commercial coal production was 46.5474 million tons (+1.19% year over year), and commercial coal sales volume was 46.4743 million tons (+1.04% year over year). 2) Price: In 2023, the price of the company's tons of coal was 204.03 yuan/ton (+6.59% year-on-year). 3) Cost and profit: In 2023, the company's cost per ton of coal was 91.04 yuan/ton (-2.04% YoY), and the gross profit per ton of coal was 112.99 yuan/ton (+14.74 yuan/ton).
Overall, the coal business revenue in 2023 was 9.482 billion yuan (+7.69% year over year), sales cost was 4.231 billion yuan (-1.03% year over year), gross profit was 5.251 billion yuan (+15.93% year over year), and gross margin was 55.38% (up 3.93 pct year on year).
The price of electrolytic aluminum fell year on year, putting pressure on the department's performance. According to the company's 2023 annual report, 1) Production and sales volume: In 2023, the company's electrolytic aluminum production was 875,500 tons (+1.34% year over year), and electrolytic aluminum sales volume was 877,800 tons (+1.75% year over year). 2) Price: The price of the company's electrolytic aluminum unit in 2023 was 16312.48 yuan/ton (-6.56% YoY). 3) Cost and profit: In 2023, the unit cost of the company's electrolytic aluminum was 13783.19 yuan/ton (-3.39% YoY), and the gross profit per unit of electrolytic aluminum was 2529.29 yuan/ton (-20.72 yuan/ton).
Overall, the sales revenue of the non-ferrous metal smelting business in 2023 was 14.578 billion yuan (-4.32% year on year), sales cost was 12.254 billion yuan (-0.91% year on year), gross profit was 2,324 billion yuan (-19.04% year on year), and gross margin was 15.94% (down 2.90 pct year on year).
Renewable energy generation has increased significantly, and gross margin has declined. According to the company's 2023 annual report, 1) Production and sales volume: In 2023, the company's power generation capacity was 8.7 billion kilowatt-hours (+2.47% year over year), and sales volume of electricity was 8.165 billion kilowatt-hours (+5.62% year over year). Among them, thermal power generation capacity was 5.605 billion kilowatt-hours (-5.98% YoY), sales volume was 5.109 billion kilowatt-hours (YoY -2.38%); new energy generation capacity was 3,095 billion kilowatt-hours (YoY +22.36%), and electricity sales volume was 3,056 billion kilowatt-hours (YoY +22.40%). 2) Price: The sales price of a thermal power unit is 0.36 yuan/kilowatt-hour (-2.79%), and the sales price of a new energy power generation unit is 0.32 yuan/kilowatt-hour (-5.41% year over year). 3) Cost and profit: In 2023, the unit cost of the company's thermal power generation was 0.27 yuan/kilowatt-hour (+2.78%), the unit cost of new energy power generation was 0.15 yuan/kilowatt-hour (-2.14% YoY); the company's gross profit per unit of thermal power generation was 0.09 yuan/kilowatt-hour (-16.68% YoY), and the unit cost of new energy power generation was 0.17 yuan/kilowatt-hour (-8.07% YoY).
Overall, the sales revenue of the electricity business in 2023 was 2,785 billion yuan (+1.23% year on year), sales cost was 1,823 billion yuan (+4.52% year over year), the company's gross profit from the power business was 963 million yuan (-4.46% year over year), and gross margin was 34.57% (down 2.06 pct year on year). Among them, sales revenue from the coal and electricity business was 1,820 million yuan (-5.10% YoY), operating costs were 1.373 billion yuan (YoY +0.34%), gross profit was 446 million yuan (YoY -18.66%), gross margin was 24.53% (year-on-year decrease 4.09pct); new energy power generation business sales revenue was 966 million yuan (+15.78% YoY), operating costs were 449 million yuan (YoY +19.78%), gross margin was 516 million yuan (YoY +12.52%), gross margin was 53.48% (YoY) (Decrease 1.55pct).
The dividend ratio remained steady, with a dividend ratio of 3.59%. In terms of dividends, according to the company's 2023 profit distribution plan, a cash dividend of 6.80 yuan (tax included) was distributed. The total annual dividend was 1,525 billion yuan (tax included), accounting for 33.44% of net profit to mother for the year. Based on the closing price of 18.95 yuan/share on April 25, 2024, the dividend rate was 3.59%.
The project is progressing steadily, and production growth can be expected. According to the company's 2023 annual report, 1) In terms of coal, the production capacity of the Southern Open Pit Coal Mine increased by 2 million tons/year. It was officially approved by the State Mine Safety Administration in August 2023. The company's coal mine production capacity officially reached 48 million/ton, and it is expected that the full increase in nuclear production capacity will reach production by 2025. 2) In terms of electrolytic aluminum, the company is vigorously promoting the preparation process for the Zahanur aluminum alloy renewal project (Zalu Phase II project). It is estimated that the electrolytic aluminum production capacity will reach 1.21 million tons in 2025 (as of December 31, 2023, the company's production capacity of electrolytic aluminum is 860,000 tons/year). 3) In terms of electricity, the company's Tongliao 1 million kilowatt outbound wind power project, the Shanghai Miaowai New Energy Base Alashan 400,000 kilowatt wind power project, and the 500,000 kilowatt wind power project at Ximeng Abagaqi Beligutai were put into operation at full capacity by the end of 2023. The company is advancing the construction of 445,000 wind power projects in Tuquan County.
Profit forecasting and investment advice. Our recommendation for power investment energy is based on the following three aspects: 1) The company is the largest coal producer in Mengdong and the Greater Northeast region. The cost per ton of coal is low, and the profit margin is considerable. 2) The company's various businesses continue to promote production capacity construction, and the growth prospects are good. 3) The company built the world's first “coal-electricity-aluminum” circular economy green industrial cluster to transform and upgrade the comprehensive smart energy industry chain. We expect that in 2024-2026, the company will achieve operating income of 29.3 billion yuan, 32.164 billion yuan, 35.662 billion yuan, net profit due to mother of 4.796 billion yuan, 5.302 billion yuan, 5.744 billion yuan, EPS (diluted) of 2.14 yuan, 2.37 yuan, and 2.56 yuan, corresponding PE to 8.9x/8.0x/7.4x with a closing price of 18.95 yuan/share on April 25, 2024. Considering that the company's power generation and aluminum electrolytic aluminum business has a lot of room to grow, the company's “buy” rating was raised .
Risk warning: Construction progress falls short of expectations, downstream demand falls short of expectations, coal prices fall beyond expectations, safety and environmental protection policies are getting stricter