Event: The company released its 2023 annual report and 2024 quarterly report. Among them, we achieved net profit of 27.239 billion yuan for the full year of 2023, an increase of 14.81% over the previous year, in line with our expectations. The DPS of the company's planned dividend in 2023 is 0.82 yuan, and the dividend ratio is 73.66%. Based on the closing price on April 30, the dividend rate is 3.18%. In the first quarter of 2024, we achieved net profit of 3,967 billion yuan, an increase of 9.80% over the previous year, exceeding our expectations.
Black and white injections supported a sharp rise in volume and price in 2023, and electricity generation was under pressure due to exhaustion of incoming water volume in 1Q24. The total amount of incoming water from Wudongde Reservoir and Three Gorges Reservoir in the upper reaches of the Yangtze River in 2023 was 1029.08 and 342,846 billion cubic meters, respectively, with year-on-year changes of -5.56% and 0.71%. Against the backdrop of the total amount of incoming water being exhausted, the total power generation capacity of the company's six cascade power plants was 276.263 billion kilowatt-hours, an increase of 5.34% over the previous year. The increase in power generation was mainly due to the fact that the Baihetan Power Station units were not fully put into operation last year. The tight supply and demand of electricity in the southwest combined with the black injection of high electricity prices. In 2023, the company's domestic hydropower feed-in tariff was 0.2813 yuan/kilowatt-hour, an increase of 0.016 yuan/kilowatt-hour over the previous year. 1Q24's incoming water from Wudongde and the Three Gorges Reservoirs was dry, with year-on-year changes of -7.71% and -4.14%. The total power generation capacity of the company's domestic power plants was 52,747 billion kilowatt-hours, a year-on-year change of -5.13%. The power generation capacity of the Three Gorges, Gezhouba, Xiluodu, Xiangjiaba, Wudongde, and Baihetan changed 15.79%, 8.94%, -7.24%, -18.65%, 3.49% and -20.79%, respectively. Considering that after the company's water storage mission is completed by the end of 2023, the Jinsha River cascade reservoir can use 41 billion cubic meters of water and can store 33.8 billion kilowatt-hours of energy, and the potential for joint redeployment of the six reservoirs can be further unleashed.
Benefiting from interest rate cuts, financial expenses fell year on year. Investment returns have increased, and the company's performance has increased significantly. The 1Q24 company achieved a 9.80% year-on-year increase in net profit to mother against the backdrop of dry water and a year-on-year decline in power generation. Among them, thanks to the company's active debt optimization, financial expenses were reduced by 296 million yuan year on year, down about 10% year on year. Second, at present, China's 5-year LPR has been lowered twice in a row. The company's current interest-bearing debt exceeds 300 billion yuan. In the interest rate cut cycle, we believe there is still room for the company's financial expenses ratio to decline. 1Q24 profit is growing, and investment income also contributed significantly. The performance of most hydropower, thermal power and other power companies in which the company is a shareholder increased significantly, contributing 100 million yuan to net investment income, an increase of 55.73% over the previous year.
Profit forecast and valuation: Combined with the results of the 2023 annual report and the 2024 quarterly report, we maintain the 2024-2025 net profit forecast of 332.53 billion yuan and the net profit forecast for 2026 to the mother of 37.557 billion yuan. The current stock price corresponds to PE 19, 18, and 17 times, respectively. We believe that a short period of time has no impact on long-term value and maintain a “buy” rating.
Risk warning: Incoming water is affected by the weather and is difficult to predict accurately.