Key points of investment:
Event: The company released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved operating income of 74.957 billion yuan, a year-on-year increase of 5.15%, and achieved net profit of 10.624 billion yuan, an increase of 17.91% over the previous year, in line with our expectations. The company plans to pay a dividend of 0.195 yuan/share (tax included). In the first quarter of 2024, the company achieved operating income of 17.988 billion yuan, an increase of 0.53% year on year, and achieved net profit to mother of 3,059 billion yuan, an increase of 1.18% year on year, which is basically in line with our expectations.
During the empty installation window, there was a slight increase in the feed-in capacity of nuclear power, and low generation in the first quarter did not hinder growth throughout the year. The company's annual comprehensive electricity price dropped from 0.4226 yuan/kilowatt in 2022 to 0.4193 yuan/kilowatt in 2023. Total electricity sales volume was 197,450 million kilowatt-hours, up 5.6% year on year. Among them, feed-in electricity for nuclear power units was 174.458 billion kilowatt-hours, up 0.72% year on year. Although no new nuclear power units were put into operation in 2023, the year-on-year capacity factor of the operating units increased 0.1 percentage points to 93.3%, and the increase in efficiency led to a slight increase in feed-in electricity throughout the year. Affected by the year-on-year increase in unit overhauls in the first quarter, the feed-in power capacity of 1Q24's nuclear power units was 40.888 billion kilowatt-hours, a year-on-year decrease of 3.17%. Quarterly fluctuations do not affect overall power generation efficiency throughout the year, and it is expected to support the steady growth of nuclear power generation throughout the year after Zhangzhou No. 1 is put into operation in the second half of the year.
In 2023, the company added 4 new approved units and promoted 11 nuclear power unit projects under construction to provide long-term support for increasing production. In 2023, the company added 4 new approved units, namely Liaoning Nuclear Power Unit 1 and 2, and Jinqimen Nuclear Power Unit 1 and 2, respectively. From 2019 to 2023, the company's cumulative number of approved units reached 15, and the number of approved units remained in the first tier. Judging from the pace of commissioning, the company will put into operation 1, 1, 2, and 5 nuclear power units respectively in 2024-2027, and nuclear power installations will continue to accelerate to ensure a steady increase in the company's long-term profits.
Under the interest rate cut cycle, the pressure on financial expenses of finance companies decreased, and the 1Q24 fee reduction trend continued. In the next few years, the company will have a huge fleet under construction, and the capital expenditure intensity will be high. The total investment plan for 2024 will reach 121,552 billion yuan. In order to reduce the pressure on financial costs, in 2023, the company achieved a 10.35% year-on-year reduction in financial expenses to 7.302 billion yuan through high-interest debt replacement and other methods. China's 5-year LPR has continued to decline in recent years, which is expected to continue to reduce financing costs and help the company unleash long-term performance flexibility. In 1Q24, the company's financial expenses continued to drop by 189 million yuan to 1,686 million yuan year on year, and we are optimistic that the company's ability to control expenses throughout the year will be further strengthened.
The scale of new energy generation is growing rapidly, and issuing REITs is expected to optimize the company's asset structure. In 2023, the company's new energy installed capacity reached 18.515,900 kilowatts, an increase of 44.76% over the previous year; the power generation capacity reached 23.382 billion kilowatts, an increase of 66.44% over the previous year, accounting for more than 10%. In 2023, CNNC Huineng's net profit of the new energy operating platform was 2,941 billion yuan, an increase of 51.6% over the previous year. New energy still has great potential for development. According to the 2023 annual report, the company holds 9.727,500 kilowatts of new energy projects under construction, including 2.7548 million kilowatts of wind power, 6.9727 million kilowatts of photovoltaics, and 650,000 kilowatts of independent energy storage plants. On April 26, the company issued an announcement on CNNC's equity and consolidated REITs issuance plan. It plans to use CNNC Huineng New Energy to raise no more than RMB 7.5 billion in capital as underlying assets. We believe this move is expected to revitalize existing assets and optimize the company's overall financial structure. With the rapid growth in installed capacity, new energy, as the company's second growth curve, will steadily contribute to incremental performance.
Profit forecast and rating: Combined with the company's 2023 annual report and the 2024 quarterly report, considering the slight decline in feed-in tariffs, we slightly lowered the company's net profit forecast for 2024-2025 to 113.18 billion yuan, 12.848 billion yuan (original value was 118.13 billion yuan, 13.50 billion yuan), and increased the 2026 net profit forecast to the mother to 13.429 billion yuan. The PE corresponding to the current stock price is 15, 13, and 13 times, respectively. Maintain a “buy” rating.
Risk warning: The progress of new energy installations falls short of expectations, and the risk of falling electricity prices