Event: The company achieved operating income of 781.12/15.641 billion yuan in 2023/24Q1; net profit of 272.39/3,967 billion yuan, up 14.81/9.80% year on year; net income after deducting non-return to mother of 275.08/3979 billion yuan, up 28.59/ 11.45% year on year; basic EPS was 1.1132/0.1621 yuan/share, up 14.81/6.16% year on year; plans to distribute 8.2 yuan for every 10 shares, dividend payment ratio 73.66%
Comment: The volume and price of large hydropower in the country has risen sharply. Mainly due to the complete completion and commissioning of the Baihetan Hydropower Station at the end of 2022, its power generation capacity increased by 43.11% year on year in 2023, and the total power generation capacity of the company's six cascade power stations increased by 5.34% year on year. Furthermore, the company's domestic hydropower feed-in price increased by more than 1 point (4.29%) year on year to 281.28 yuan/MWatt-hour, driving the company's domestic hydropower revenue up 12.39% year on year, accounting for 4.64 pcts to 88.39% year on year, and gross margin increased 1.23 pcts to 60.97% year on year. Mainly benefiting from the “six-reservoir joint transfer”, the company achieved zero waste water and electricity loss throughout the year, and the comprehensive utilization rate of water resources reached a record high. Cascade power plants saved water and increased power generation by 12.13 billion kilowatt-hours throughout the year, and cascade reservoirs were fully charged on schedule for the first time. It is expected that as the “six-bank joint modulation” effect continues to show, the volatility of the company's power generation capacity may decrease. In 2024, the company plans to achieve an annual power generation capacity of 307.4 billion kilowatt-hours, an increase of 11.3% over the previous year, when the total amount of incoming water from the Wudongde Reservoir is not less than 130 billion cubic meters, and the distribution of incoming water from the Three Gorges Reservoir is not less than 490 billion cubic meters, and the distribution of incoming water during the year is conducive to power generation.
International business is progressing steadily. In 2023, the company's revenue from other industries was 8.795 billion yuan, up 21.44% year on year, gross margin decreased by 2.42 pcts year on year, including foreign assets of 48.488 billion yuan, accounting for 8.5% of the company's total assets, and the annual net profit of overseas business was about 1.45 billion yuan, accounting for 5.2% of the company's net profit. The business performance reached a record high. Overseas operation and maintenance projects such as Pakistan's Carlot Hydropower Project, Pakistan's Three Gorges Wind Power, and Three Gorges Hydropower Technology Reform were carried out smoothly and in an orderly manner, successfully achieving the company's first overseas owned new energy project The successful delivery of the Arrow photovoltaic project in Peru promoted the continuous strengthening of the company's development, distribution and sales industry chain in the Peruvian region, and basically formed a healthy development pattern of “water scenery” complementary businesses.
High dividends highlight the value of the investment. In 2023, the company plans to pay 8.2 yuan for every 10 shares, with a total cash dividend of 20.064 billion yuan and a dividend payment ratio of 73.66%, which satisfies the relevant agreement in the company's articles of association that “profit distribution for the year 2021-2025 shall be a cash dividend of not less than 70% of the realized net profit”. The dividend rate is 3.2% based on current stock prices, and is expected to increase as the company's performance grows.
Profit forecast: In 2024-2026, the company's revenue is expected to be 864/893/11 billion yuan, net profit to mother of 330/359/37.7 billion yuan, and EPS 1.35/1.47/1.54 yuan, corresponding to PE 19.11/17.60/16.73 times PE, maintaining a “buy” rating.
Risk warning: The incoming water falls short of expectations, the return on investment falls short of expectations, and the overseas business falls short of expectations.