1Q24 results are in line with our expectations
The company announced 1Q24 results: revenue of 7.91 billion yuan, +20.6% year on year, net profit to mother of 830 million yuan, -1% year over year, corresponding to profit of 0.2 yuan per share, which is in line with our expectations.
1Q24's new energy generation capacity was 4,117 Gwh, +0.3% YoY, feed-in price 0.43 yuan/kwh, year-on-year, with market-traded electricity accounting for 35.67%; natural gas transmission volume was 2.23 billion square meters, +33.9% YoY, mainly due to the commencement of LNG production in Tangshan driving 1Q24 LNG sales volume +46,590% to 360 million square meters YoY.
Development trends
The gas business is profitable or continues to improve. We estimate that benefiting from the implementation of low-cost LNG long-term agreements and improved downstream demand, 1Q24's natural gas business profit increased significantly compared to 1Q23.
Looking ahead, considering 1) the overall price of LNG in summer is easy to rise and fall, the company may have many low-cost LNG spot import opportunities, and 2) the retail gas business benefits from the reduction in the annual contract price of upstream pipeline gas, and the cost pressure is expected to ease. We judge that the profit of the natural gas business may continue to improve in 2024, which is an important support for the company's performance growth.
Profits from new energy generation are under pressure. The profit of 1Q24's new energy power generation business is under pressure. We think it is mainly due to the year-on-year decline in the number of hours used by the wind power business (we estimate that the number of hours used by 1Q24's wind power decreased by 30-40 hours over the same period last year). Looking ahead, we believe that the profit improvement in the company's wind power business will still have to wait for 1) the overall amount of wind resources in Hebei to improve; 2) the operation/installed scale of gas peak-shaving power plants in Hebei will further increase.
Gradually replace high-interest debt. As of 1Q24, the company's interest-bearing debt exceeded 40 billion yuan, and financial expenses put some pressure on the company's profit improvement. At the performance meeting, management indicated that it would gradually replace some medium- to long-term high-interest debt with medium- and short-term liquid loans with relatively low interest rates to reduce the pressure on financial expenses.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current A share price corresponds to the 2024/2025 price-earnings ratio of 14.5 times/12.3 times. The current H share price corresponds to a price-earnings ratio of 4.8 times/3.9 times in 2024/2025. A-shares remain outperforming the industry rating and target price of 10.00 yuan, corresponding to 16.9 times the price-earnings ratio of 2024 and 14.3 times the price-earnings ratio of 2025, with 16.0% upside compared to the current stock price. H shares remain outperforming the industry rating and the target price of HK$3.50, corresponding to 5.3 times the 2024 price-earnings ratio and 4.3 times the 2025 price-earnings ratio, with 9.0% upside compared to the current stock price.
risks
Natural gas prices have fluctuated greatly, and feed-in electricity prices for wind power have declined markedly.