Introduction to this report:
The company's electricity prices declined slightly in 2023, and the installed capacity is expected to continue to grow with sufficient project reserves.
Key points of investment:
Downgraded to a “prudent increase” rating: Considering factors such as electricity prices and consumption of the company's new energy projects, EPS from 2024 to 2025 was lowered to 0.28/0.30 yuan (original value 0.32/ 0.36 yuan), and EPS in 2026 was 0.31 yuan. Referring to comparable companies in the industry and considering the company's electricity prices or pressure, PE was given 18 times in 2024, the target price was lowered to 5.04 yuan, and the rating was lowered to a “cautious increase” rating.
1Q24 results fell short of expectations. The company's revenue in 2023 was 26.5 billion yuan, +11.2% year-on-year; net profit to mother during the same period was 7.18 billion yuan, +0.9% year-on-year. The company's 1Q24 revenue was 7.90 billion yuan, +15.3% YoY; net profit for the same period was 2.42 billion yuan, +0.1% YoY, lower than our previous expectations. The company plans to pay 0.078 yuan per share in 2023, with a dividend ratio of 31.1%.
The share of market-based electricity transactions has increased, and electricity prices have declined slightly. The slight decline in the company's 1Q24 performance was mainly dragged down by a decrease in investment income and an increase in minority shareholders' profit and loss: 1) the company's 1Q24 net investment income of 160 million yuan, or -50.2% year-on-year; 2) the profit and loss of minority shareholders of the company 1Q24 was 370 million yuan, or -33.5% year-on-year. The company's average tax-free feed-in price in 2023 was 0.488 yuan/kilowatt-hour, compared to -2.8%. We estimate that this may be mainly due to the increase in affordable new energy projects and the increase in market-based electricity transactions (the company's total market-based electricity volume in 2023 was 26.1 billion kilowatt-hours, accounting for 48.6% of total feed-in electricity, +8.1 ppts year over year).
Installed capacity drives electricity growth, and project reserves are abundant. By the end of 2023, the company's cumulative installed capacity reached 40 GW, +51.0% year-on-year. 1Q24's feed-in electricity capacity was 17.7 billion kilowatt-hours, +28.7% year over year.
As of the end of 2023, the project under construction is scheduled to have an installed capacity of 18.8 GW. We believe that the company's grid-connected installed capacity is expected to maintain rapid growth with the support of sufficient project reserve resources.
Risk warning: Installed capacity falls short of expectations, electricity prices fall short of expectations, subsidies fall short of expectations, etc.