Brief performance review
On the evening of April 28, the company released its annual report for the year 23 and the quarterly report for the year 24. It achieved revenue of 95.98 billion yuan, +19.7% year-on-year; net profit to mother was 6.52 billion yuan, turning a year-on-year loss into a profit. 1Q24 achieved revenue of 20.2 billion yuan, +13.5% year-on-year; realized net profit of 1.82 billion yuan, or +79.6% year-on-year. The planned cash dividend for 2023 is 0.25 yuan/share, with a dividend ratio of about 51.4%. The current stock price corresponds to a dividend rate of about 4.0%.
Management analysis
The supply and demand for electricity in Zhejiang is still tight. The number of hours the company used coal machines in '23 was +123 hours compared to the same period.
Electricity consumption in Zhejiang Province increased by 6.8% year on year in '23, and maximum load increased by 8.2% year on year. As the “ballast stone” of the power system, thermal power bears the peak guarantee responsibility. During the peak summer season in Zhejiang Province, the highest load rate of coal-fired units in Zhejiang Province reached 97.3%, an increase of 0.2 pct over the 22-year historical high; while the company's coal machines accounted for 57.6% of the province's integrated coal and electricity installations, and the number of hours used in 23 years reached 5533 hours, +123 hours year on year. Supercharged Ledian Phase III was put into operation before peak summer, generating 163.24 billion kilowatts of electricity throughout the year, +7.4% over the same period last year.
The 1Q24 revenue growth rate was lower than the electricity growth rate, or was dragged down by falling electricity prices and declining sales of photovoltaic products. 1Q24 completed the feed-in electricity capacity of 38.35 billion kilowatt-hours, of which thermal power accounted for 99.8%; during the same period, the company achieved revenue of 20.2 billion yuan, +13.5% year-on-year.
Judging from the electricity purchase price of industrial and commercial agents in Zhejiang Province, the average feed-in price of 3M23 is close to the average annual bilateral negotiation transaction price of electricity in this year; the 3M24 proxy electricity purchase price was 480.4 yuan/MWh, -3.5% year over year, and the total electricity cost for coal capacity was 13.9 yuan/MWh. The total price of the two electricity prices decreased by about 0.7% year on year. In addition, the revenue of China Lai Co., Ltd. fell 52.4% year on year in 1Q24, mainly due to a decrease in the sales scale of photovoltaic manufacturing products.
Main business and equity investments bring abundant cash flow, providing conditions for a high percentage of dividends.
Benefiting from falling coal prices in the market, the profitability of the company's main business improved dramatically in '23. The gross profit margin of the power sector was 7.4%, a sharp increase of 15.8pct over the previous year; the company achieved net operating cash flow of 11.48 billion yuan, a sharp increase of 5022% over the previous year. Furthermore, in '23, the company's participation in Qinshan Nuclear Power and Sanmen Nuclear Power in Zhejiang Province obtained investment income of 1.47 billion yuan and cash dividends of 1.05 billion yuan; participation in thermal power assets held by integrated coal and power enterprises such as Guoneng Group obtained investment income of 2.08 billion yuan and cash dividends of 1.68 billion yuan. Abundant cash flow provides the foundation for dividends. The company's annual cash dividend for '23 is 0.25 yuan/share, with a dividend ratio of about 51.4%.
Profit Forecasts, Valuations, and Ratings
We expect the company to achieve net profit of 84.0/93.4/11.5 billion yuan from 2024 to 2026, EPS of 0.63/0.70/0.86 yuan respectively, and the company's current stock price corresponding to PE valuations of 10 times, 9 times, and 7 times, respectively, maintaining a “buy” rating.
Risk warning
Risks such as the progress of new projects, the degree of decline in coal prices, electricity demand, progress in electricity marketization, and the performance of China's shares falling short of expectations