Key points of investment
Incident: In 2023, the company achieved revenue of 78.112 billion yuan, an increase of 50.04% (13.43% after adjustment); net profit to mother of 27.239 billion yuan, up 27.83% (14.81% after adjustment); net profit after deducting non-return to mother of 27.508 billion yuan, an increase of 28.59% (28.59% after adjustment); and plans to pay a dividend of 8.20 yuan (tax included) for every 10 shares to all shareholders, with a dividend ratio of 73.66%. In the first quarter of 2024, the company achieved revenue of 15.641 billion yuan, an increase of 1.58%; net profit to mother was 3,967 billion yuan, an increase of 9.8%.
In 2023, profits rose sharply, and financial expenses improved in the first quarter of 2024 due to poor water supply. In 2023, the company achieved net profit of 27.239 billion yuan, a year-on-year increase of 27.83% (14.81% after adjustment), in line with expectations. In the first quarter of 2024, the company achieved operating income of 15.641 billion yuan, an increase of 1.58% over the previous year; net profit to mother was 3,967 billion yuan, an increase of 9.8% over the previous year. In the first quarter of 2024, the total power generation capacity of the company's six cascade power plants was about 52,747 billion kilowatt-hours, a decrease of 5.13% compared with the previous year, and the incoming water was too poor. The growth rate of net profit to mother in the first quarter of 2024 greatly exceeded the revenue growth rate, mainly due to a decrease of 296 million yuan in financial expenses and an increase of 322 million yuan in investment income.
Encourage market-based transactions and increase water storage, and expect the company's volume and price to rise rapidly. 1) Water storage and the joint transfer of six warehouses will release power generation. ① Water storage completed: The company's six cascade reservoirs in the main stream of the Yangtze River completed the 2023 water storage task, with a total usable water volume of 41 billion cubic meters and 33.8 billion kilowatt-hours of energy storage; the usable water volume of cascade reservoirs increased by more than 16 billion cubic meters year-on-year, and energy storage increased by more than 9 billion kilowatt-hours, an increase of 36% over the previous year, ensuring power generation capacity during the dry water period in the spring of 2024. ② Six bank joint conversion: The company's cascade power plant was upgraded from four banks to six banks to further improve the efficiency of the use of water resources. In 2023, an additional 12.13 billion kilowatt-hours of power generation was added. The six-bank joint conversion continued to play a role, bringing increased power generation to the company. Encouraged by national policies, the share of marketization will further increase, and feed-in tariffs will rise. Electricity prices for the company's hydropower stations are determined according to contracts and national policies; Gezhouba uses cost plus pricing; the Three Gorges, Xiluodu, and Xiangjiaba use reverse land-based electricity prices. Among them, some electricity in Xiluodu and Xiangjiaba uses market-based pricing. The Wu and Bai hydropower plants newly incorporated in 2023 are mainly market-based pricing. The share of the company's market-based electricity transactions increased to 37.76% in 2023 (7.6% in 2022, 33.91% after considering the black and white balance adjustments). The company's feed-in tariff in 2023 was 281.28 yuan/megawatt-hour (269.72 yuan/megawatt-hour in 2022), an increase of 11.56 yuan/megawatt-hour over the previous year.
Profit forecasting and investment ratings: Encourage market-based transactions & increased water storage, and expect the company's volume and price to rise sharply.
We maintain our 2024-2025 net profit forecast of 343.50/36.135 billion yuan, adding a 2026 net profit forecast of 37.656 billion yuan; a year-on-year increase of 26.1%/5.2%/4.2% in 2024-2026; and maintain a “buy” rating compared to the previous PE 18.4/17.5/16.8 times (valuation date 2024/4/30).
Risk warning: Incoming water volume falls short of expectations, risk of electricity price fluctuations, policy risk, increased risk of competition in the new energy power market