Changjiang Electric Power released its 2023 annual report and 2024 quarterly report. In 2023, it achieved net profit of 27.239 billion yuan, +14.81% year-on-year; 1Q24 achieved net profit of 3,967 billion yuan, or +9.80% year-on-year.
Electricity consumption grew steadily in 2023, and the performance was in line with expectations. Changjiang Electric Power released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 78.112 billion yuan, +13.43% year over year; net profit to mother was 27.239 billion yuan, +14.81% year over year. 1Q24 achieved operating income of 15.641 billion yuan, +1.58% year over year; net profit to mother was 3,967 billion yuan, +9.80% year over year. In 2023, the company plans to pay a cash dividend of 8.2 yuan for every 10 shares, with a dividend ratio of 73.66%, and a total cash dividend of 20.064 billion yuan.
Baihetan was put into operation and electricity prices increased, contributing to 23 years of performance growth. In 2023, the total amount of incoming water from the Wudongde Reservoir was about 102.908 billion square meters, but benefiting from the complete commissioning of the Baihetan Power Station, the power generation capacity increased by 43.11% year on year, and the Three Gorges incoming water was higher by 0.71% year on year. The company's hydropower generation capacity in 2023 was 276.263 billion kilowatt-hours, +5.34% year over year; feed-in electricity prices were 281.28 yuan/megawatt-hour, +4.3% year on year. In 1Q24, incoming water from Wudongde and the Three Gorges Reservoirs all dried up. The company completed 52,747 billion kilowatt-hours of power generation, -5.13% over the same period last year. As of April 29, 2024, the Three Gorges Reservoir's water storage capacity was 25.151 billion square meters, +3.9% year-on-year, and incoming water is expected to improve.
Mergers and acquisitions bring about short-term increases in financial expenses, and investment returns provide good support. The company's gross margin in 2023 was 57.83%, +0.53 pct year on year; net margin was 35.79%, -5.79 pct year on year. Sales/management/R&D/finance rates were 0.25%/1.75%/1.01%/16.08%, respectively, -0.07pct/-0.49pct/+0.84pct/+8.22pct year-on-year. The sharp increase in financial expenses was mainly due to the merger and acquisition of Yunchuan Company, which led to an increase in the size of interest-bearing debt, and a corresponding increase in interest expenses. The company achieved investment income of 4.750 billion yuan, +3.3% year-on-year, of which the 1.05% reduction in Shanghai Electric Power's equity holdings contributed about 119 million yuan in investment income.
Profit forecasting and valuation. The company's six cascade reservoirs have all completed the 2023 water storage task, and the joint transfer of the six reservoirs is expected to bring increased power generation. It is expected that electricity will increase throughout the year after the incoming water improves; vigorously allocate savings and new energy sources, and have abundant on-hand reserve resources; develop investment business around the main business, and stable investment returns provide good support for performance growth; the cash flow situation is good, and continued high dividends highlight long-term investment value. The company's net profit for 2024-2026 is estimated to be 344.02, 364.61, and 37.480 billion yuan, up 26.3%, 6.0%, and 2.8% year-on-year; PE corresponding to the current stock price is 18.1x, 17.1x, and 16.6x, respectively, maintaining an “increase in holdings” rating.
Risk warning: The incoming water situation falls short of expectations; the construction of a market-based electricity pricing mechanism falls short of expectations; the progress of installation and renovation construction falls short of expectations; electricity demand falls short of expectations, etc.