Recently, the company released its 2014 quarterly report. In the first quarter, the company achieved revenue of 9.887 billion yuan, an increase of 0.1% over the previous year; net profit belonging to equity holders belonging to the company was 2,482 billion yuan, an increase of 2.59% over the previous year.
Business performance remained stable. The company's revenue in the first quarter was 9.877 billion yuan, up 0.10% year on year. Among them, revenue from the wind power division was 7.376 billion yuan, down 4.70% year on year, revenue from the thermal power division was 1,976 billion yuan, up 3.28% year on year, and revenue from other divisions was 525 million yuan, up 146.45% year on year. We expect that due to the expansion of market-based electricity transactions and the increase in affordable projects, the decline in average feed-in electricity prices for wind power and photovoltaics in the first quarter was the main reason dragging down the company's revenue growth.
Electricity generation increased 8.27% year over year. Benefiting from the steady increase in installed capacity, the company's overall power generation capacity has maintained steady growth. By the end of the first quarter of 2024, the company had accumulated 21,225.2 gigawatt-hours of power generation, an increase of 8.27% over the previous year. Among them, wind power grew by 1.37%, thermal power increased by 11.30%, and other renewable energy sources increased by 233.33%.
The scale of the new installed capacity is expected to increase rapidly. In the first quarter of '24, the company added 0.56 GW of holding installed capacity, including 26.25 MW of wind power, 57.51 MW of PV, and acquired 478.40 MW of PV project capacity. As of the end of the first quarter of 2024, the company's controlled installed capacity was 36.16 GW, up 16.23% from the same period last year. The installed capacity of wind power, thermal power and other renewable energy sources was 27.78/1.88/6.5 GW respectively, up 6.07%/0%/113.75% from the same period last year. In 2024, the company plans to start 10 GW of new energy projects and put into production 7.5 GW.
“From big to small” is beneficial to improving operational efficiency in the long run. By the end of '23, the company had nearly 10,000 units of 1.5 MW and below, accounting for 68% of the total number of units in operation. The company plans to implement a “big to small” strategy in the next few years by dismantling old small units and replacing them with modern units with larger stand-alone capacity. In the process of implementing the “big to small” plan, the company may face the risk of accruing impairment, which may put some pressure on the company's financial statements in the short term. However, from a long-term perspective, this strategy will help optimize the company's overall asset structure and increase operating profit margin.
Profit forecast and valuation: We expect the company's revenue for 24-26 to be $410.1/450.6/$50.06 billion, respectively, and net profit attributable to equity holders of the Company to be $81/91.9/10.25 billion yuan, respectively. Earnings per share are 0.97/1.10/1.23 yuan/share, respectively. The price-earnings ratio corresponding to the current stock price is 5.78/5.11/4.58 X, respectively. As a leading company in wind power operations, the company's installed energy capacity is expected to reach its peak. The majority shareholders will continue to inject new energy assets, and the valuation level is expected to increase. Maintain a “buy” investment rating and give a target price of HK$11, corresponding to PE 10.5 X in 2024.
Risk warning: The wind fell short of expectations; the scale of new installed capacity fell short of expectations; the drop in feed-in tariffs exceeded expectations.