Introduction to this report:
The 1Q24 results got off to a good start, and the profit of the main business improved markedly.
Summary:
Maintain “Overweight” Rating: Maintain Profit Forecast: 2024-2026 EPS of $0.63/0.64/0.69, maintain target price of HK$5.30, maintain “Overweight” rating.
1Q24 results were in line with expectations. The company's 1Q24 revenue was 30.95 billion yuan, -3.2% YoY; net profit to mother was 1.86 billion yuan, +64.2% YoY, in line with our expectations. Looking at it from an incremental perspective:
1Q24's operating profit was 2.75 billion yuan (year-on-year +1.45 billion yuan); of this, net investment income was 1.15 billion yuan (year-on-year -0.4 billion yuan), asset disposal income was 310 million yuan (year-on-year +390 million yuan), and the operating profit of the main business (operating profit - net investment income - asset disposal income) was 1.22 billion yuan (year-on-year +1.10 billion yuan).
The decline in coal prices led to the recovery of profits in the main business. 1Q24's feed-in power was 52.5 billion kilowatt-hours, -0.3% year-on-year; of these, thermal power feed-in capacity was 51.5 billion kilowatt-hours, or -0.7% year-on-year. The average electricity price in 1Q24 was 0.509 yuan/kilowatt-hour, -4.1% year-on-year and -0.6% month-on-month. 1Q24's gross profit margin was 8.4%, +4.2 ppts year over month and +3.7 ppts month over month. We believe that the year-over-year/month-on-month improvement in gross margin was mainly related to the decline in comprehensive coal prices, and the profit improvement in the main 1Q24 business was significant.
The balance sheet continues to improve, and dividend capacity continues to improve. As of the end of 1Q24, the company's balance ratio was 60.4%, -6.1 ppts year-on-year, and -2.2 ppts compared to the end of 2023. 1Q24 The company's capital expenditure was 1.60 billion yuan, -10.1% YoY. We expect the company's balance sheet repair trend to continue in the context of stabilizing profits from thermal power assets and a marginal slowdown in capital expenditure, and the potential dividend space is expected to increase.
Risk warning: Feed-in electricity prices fell short of expectations, coal prices exceeded expectations, investment income from participation in new energy and coal mines fell short of expectations, large asset depreciation, etc.