Incident Overview: On April 29, the company released its 2023 annual report. During the reporting period, it achieved operating income of 29.142 billion yuan, an increase of 3.36%; net profit to mother of 3.459 billion yuan, up 219.52% year on year; net profit after deducting non-return to parent of 3.084 billion yuan, an increase of 271.42 billion yuan; the company plans to distribute cash dividends of 0.40 yuan per share to all shareholders, for a total cash dividend of 1,958 billion yuan, with a cash dividend ratio of about 56.34%. The company released its 2024 quarterly report. During the reporting period, it achieved operating income of 8.071 billion yuan, up 10.87% year on year; net profit to mother was 1,159 million yuan, up 57.96% year on year; net profit after deducting non-return to mother was 891 million yuan, an increase of 86.63% year on year.
Continued restoration of thermal power in 2023, 1Q24 “full firepower”: In 2023, the company controlled coal power generation capacity was 31.170 billion kilowatt-hours, a year-on-year decrease of 1.5%; however, benefiting from the downward trend in coal prices, the annual coal power sector achieved gross profit of 1,398 billion yuan, an increase of 1,392 billion yuan; the gas and electricity sector achieved gross profit of 7180 million yuan, an increase of 28.9% over the previous year; the total gross profit of the thermal power sector was 2.157 billion yuan, an increase of 15.38 billion yuan over the previous year The gross margin of thermal power increased by 7.85pct year-on-year to 11.35%. The power generation capacity of 1Q24's local controlled coal power units in Shanghai (excluding the others 2, same below) was 4.406 billion kilowatt-hours, up 10.1% year on year; the power generation capacity of the Shanghai gas power unit was 2.121 billion kilowatt-hours, up 71.1% year on year; the total power generation capacity of the company's thermal power generation in a single quarter was 10.722 billion kilowatt-hours, an increase of 1.69 billion kilowatt-hours over the previous year, an increase of 18.4%. Q1 The company's average feed-in electricity price was 0.515 yuan/kilowatt-hour, down 0.8 points/kilowatt-hour from the previous year, a decrease of 1.5%. The high increase in electricity made up for the slight drop in electricity prices, and revenue growth in a single quarter was high.
Investment income helps performance: In 2023, the company achieved net investment income of 1,567 billion yuan, an increase of 1,295 billion yuan over the previous year. On the one hand, the six power plants of Shangdian Caojing, Shangdian Waigaoqiao, Waigaoqiao No. 2, Huaneng Shidongkou, Caojing Thermal Power, and Huaneng Combustion Engine, in which the company participated in 2023 confirmed investment income of 138 million yuan, while confirmed investment losses of 649 million yuan in the same period last year. The company's investment income in joint ventures increased by 771 million yuan over the same period last year.
On the other hand, it is because other illiquid financial assets (mainly joint investment in nuclear power and Zhongtian) confirmed investment income of 915 million yuan in 2023, an increase of 525 million yuan over the previous year. In 1Q24, the company achieved investment income of 345 million yuan in a single quarter, an increase of 184 million yuan over the previous year, an increase of 113.9%; at the same time, the fair value of financial assets held by the Q1 company increased 41 million yuan year on year, confirming profit and loss of 319 million yuan from changes in fair value.
The landscape progressed steadily: in 2023, wind power and photovoltaics achieved total revenue of 3,639 billion yuan, up 5.9% year on year; gross profit of 1,850 billion yuan, down 3.7% year on year, but the total net profit of the three new energy subsidiaries was 1,219 billion yuan, up 6.5% year on year. 1Q24's wind power and photovoltaic power generation capacity was 15.15 billion kilowatt-hours and 590 million kilowatt-hours respectively, up 8.2% and 21.9% year-on-year respectively. The performance of Fengguang New Energy is expected to grow steadily.
Investment advice: Coal prices are still in a downward channel, and the performance of controlling and participating in coal power is expected to continue to improve. According to changes in electricity volume, electricity prices, and fuel costs, the company's profit forecast is estimated to be 0.79/0.89 yuan (previous value was 0.78/0.88 yuan) for 24/25, and EPS for the new 26 years will be 0.95 yuan, corresponding to the closing price of PE on April 30, 10.7/9.5/9.0 times, respectively. Referring to the valuation level of provincial thermal power companies, the company was given 12.0 times PE in 2024, with a target price of 9.48 yuan/share, maintaining the “recommended” rating.
Risk warning: 1) macroeconomic pressure reduces electricity demand; 2) rising fuel prices raise operating costs; 3) electricity market competition reduces feed-in tariffs; 4) supply restructuring suppresses unit output.