Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 78.11 billion yuan, an increase of 13.4% over the previous year (after adjustment), and achieved net profit of 27.24 billion yuan to mother, an increase of 14.8% over the previous year (after adjustment). The 24Q1 company achieved operating income of 15.64 billion yuan, an increase of 1.6% over the previous year, and achieved net profit of 3.97 billion yuan to mother, an increase of 9.8% over the previous year.
In 2023, power generation was +5.3% YoY, and 24Q1 was -5.1% YoY. In 2023, the total amount of incoming water from the Wudongde Reservoir in the upper reaches of the Yangtze River was about 102.908 billion cubic meters, 5.46% less than the same period last year; the total amount of incoming water from the Three Gorges Reservoir was about 342,846 billion cubic meters, up 0.71% from the same period last year; the company's total power generation capacity was 276.263 billion kilowatt-hours, an increase of 5.34% over the same period last year. 2024Q1, the total amount of incoming water from the Wudongde Reservoir in the upper reaches of the Yangtze River was about 14.849 billion cubic meters, 7.71% less than the same period last year; the total amount of incoming water from the Three Gorges Reservoir was about 49.767 billion cubic meters, 4.14% lower than the same period last year. The total power generation capacity of the six cascade power plants in the company was 52,747 billion kilowatt-hours, a decrease of 5.13% over the same period last year.
Optimization of financial expenses and improvement of investment returns. In 2023, the company's R&D expenses increased sharply to 790 million yuan, an increase of 70 billion yuan over 2022, and annual R&D investment of 2,068 billion yuan (excluding tax), driving the company's transformation from a traditional power producer to a world-leading innovative clean energy enterprise; financial expenses were 12.56 billion yuan, an increase of 2,975 billion yuan over the previous year, mainly due to the increase in the size of the interest-bearing debt of the merger and acquisition of Yunchuan Company, and the corresponding increase in interest expenses.
2024Q1, the company's financial expenses decreased by 300 million yuan year on year. We think it may be due to the company's replacement of some of its high-cost liabilities; the investment income reached 90 million yuan, an increase of 320 million yuan over the previous year, or related to the increase in the profit status of participating companies.
Investment advice and valuation: We expect the water to be repaired as scheduled in 2024, and at the same time combined with the joint adjustment of the six banks, we are optimistic that the company's performance will increase in 24 years. The company's revenue for 2024-2026 is estimated to be 87.85 billion yuan, 89.56 billion yuan, and 90.61 billion yuan respectively, with growth rates of 12.5%, 1.9%, and 1.2% respectively, and net profit to mother of 33.56 billion yuan, 36.55 billion yuan, and 37.95 billion yuan respectively, with growth rates of 23.2%, 8.9%, and 3.8% respectively, maintaining the “increase” rating.
Risk warning: incoming water falls short of expectations; risk of electricity price fluctuations; savings construction falls short of expectations.