Zhejiang Electric Power released its 2023 annual report and 2024 quarterly report. In 2023, it achieved net profit of 6.520 billion yuan, +456.83% year-on-year; 1Q24 achieved net profit of 1,815 billion yuan, +79.62% year-on-year.
The flexibility of thermal power has been fully released, and performance continues to improve. Zhejiang Electric Power released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 95.975 billion yuan, +19.68% year over year; net profit to mother of 6.520 billion yuan, +456.83% year over year; 1Q24 achieved operating income of 20.024 billion yuan, +13.45% year over year; and net profit to mother of 1,815 billion yuan, +79.62% year over year. In 2023, the company plans to pay a cash dividend of 2.50 yuan for every 10 shares, with a dividend ratio of 51.42% and a cash dividend of 3.352 billion yuan.
Increased electricity consumption+commissioning of new units has led to a high increase in power generation. In 2023 and the first quarter of 2024, electricity consumption in Zhejiang Province increased by 6.78% and 12.16%, respectively, above the national average. Benefiting from increased demand and the commissioning of the Yueqing Power Plant Phase III coal-fired units, the company's power generation capacity in 2023/1Q24 was 1632.38/38.348 billion kilowatt-hours, respectively, an increase of 7.4%/17.8% over the previous year. Among them, thermal power generation capacity was 1629.74/38.290 billion kilowatt-hours, respectively, an increase of 7.3%/17.8% over the previous year.
The decline in fuel costs raised profit levels, and investment returns increased performance. Benefiting from declining fuel costs, the company's profit level increased markedly. The overall gross margin in 2023 reached 9.41%, +13.36 pct year on year; net margin reached 8.23%, +12.73 pct year on year. Among them, the gross margin of the electricity business reached 7.41%, +15.76pct year-on-year.
Long-term equity investment income calculated under the Company Equity Act in 2023 was 4.236 billion yuan, +45.0% year-on-year. The efficiency of participating companies increased their performance. The average price of the 1Q24 Qingang 5,500 kcal thermal coal market was 914.24 yuan/ton, -20.75% year over year, and is expected to remain low. The company's performance in the first half of the year is expected to improve further year-on-year.
The company's photovoltaic business grew rapidly after the merger was released. In 2023, the company's photovoltaic power generation capacity was 251 million kilowatt-hours (+70.3%), of which China Lai shares contributed 61.77,800 kilowatt-hours and was fully connected to the Internet. In 2023, Zhonglai Co., Ltd. achieved revenue of 12.259 billion yuan, +28.01% year-on-year; net profit to mother was 527 million yuan, +31.18% year-on-year. By the end of 2023, China Lai Co., Ltd. had an annual production capacity of 320 million square meters of backboard and a cumulative delivery of more than 260 GW, making it in a leading position in the industry. The company is also planning to lay out new energy sources, and it is expected that it will continue to exert synergetic effects.
Profit forecasting and valuation. The company enjoys the advantage of a high electricity consumption growth rate in Zhejiang. The decline in coal prices has led to an increase in the efficiency of participating coal power companies. The two-tier electricity price system will further stabilize the profitability of coal power; investment income from participating in nuclear power companies will provide stable support for performance; and the table also exerts a synergetic effect, and high annual performance can be expected. The company's net profit for 2024-2026 is estimated to be 78.39, 86.02, and 9.185 billion yuan, up 20.2%, 9.7%, and 6.8% year-on-year; the PE corresponding to the current stock price is 10.6x, 9.6x, and 9.0x, respectively, maintaining the “increase” rating.
Risk warning: Higher coal costs than expected, feed-in tariff fluctuations, market-based transactions falling short of expectations, lagging progress in new energy projects, etc.