Core views

2024Q1 achieved operating income of 30.737 billion yuan, up 9.58% year on year; net profit to mother was 1,331 billion yuan, up 872.26% year on year. Thanks to the drop in thermal coal prices, the company's coal combustion costs improved significantly, and net profit returned to mother increased sharply in the first quarter. In the first quarter of 2024, the company achieved 59.861.9 billion kilowatt-hours of feed-in electricity, an increase of about 12.82% over the previous year.

Among them, the feed-in electricity volumes for coal engines, gas engines, hydropower, wind power, and photovoltaics were 459.335, 49.778, 35.192, 43.191, and 1,1122 billion kilowatt-hours, respectively. In terms of feed-in tariffs, the company achieved an average feed-in tariff of RMB 476.35 per megawatt hour (tax included) in 2024Q1, a year-on-year decrease of about 2.73%. Currently, there is sufficient supply in the thermal coal market. The thermal coal supply and demand situation is biased towards relaxation. Combined with the increase in feed-in electricity from renewable energy sources squeezing demand for thermal power, we expect coal prices to remain low in 2024, and the company's coal power profitability is expected to continue to improve. Under a trend where thermal power profits continue to improve and the scale of new energy sources continues to grow, we expect the company's operating performance to grow steadily.

occurrences

Datang Power Releases Report for the First Quarter of 2024

2024Q1 achieved operating income of 30.737 billion yuan, a year-on-year increase of 9.58%; net profit of 1,331 billion yuan, an increase of 872.26%; net profit after deducting non-return of 1,327 billion yuan, an increase of 2691.83%; achieved a weighted return on net assets of 3.35%, an increase of 4.15 percentage points over the previous year; and achieved basic earnings per share of 0.05 yuan/share.

Brief review

The scale of revenue grew steadily, and net profit to mother increased dramatically

2024Q1 achieved operating income of 30.737 billion yuan, up 9.58% year on year; net profit to mother was 1,331 billion yuan, up 872.26% year on year. Thanks to the drop in thermal coal prices, the company's coal combustion costs improved significantly, and net profit returned to mother increased sharply in the first quarter. In terms of the period expense ratio, the 2024Q1 company's management expenses rate and financial expense ratio were 1.53% and 4.43%, respectively, with year-on-year changes of -0.07 and -0.99 percentage points. The company's financial expense ratio improved year on year, mainly due to a year-on-year decrease of 159 million yuan in Q1 interest expenses, a decrease of 10.44%. In terms of investment income, 2024Q1 achieved an investment income of 90 million yuan, a year-on-year decrease of 94.05%, mainly due to the year-on-year decline in the performance of foreign-invested companies. In terms of cash flow, 2024Q1, net cash flows from the company's operating, financing and investment activities were $61.64 billion, -10.50, and -3160 billion yuan, respectively. The company's net cash flow from operating activities increased 75.65% year on year, mainly due to the year-on-year increase in sales repayments in the current period.

The clean energy transition is progressing steadily. In the first quarter, feed-in electricity volume increased year over year. Companies actively promoted the green energy transition, and the installed ratio of clean energy continued to increase. By the end of 2023, the company had an installed capacity of 73.2910 million kilowatts, of which 4562.40, 663.16, 920.47, 746.45, and 4.3662 million kilowatts were respectively for coal engines, gas turbines, hydropower, wind power and photovoltaics. In the first quarter of 2024, the company achieved 59.861.9 billion kilowatt-hours of feed-in electricity, an increase of about 12.82% over the previous year. Among them, feed-in electricity volumes for coal engines, gas turbines, hydropower, wind power, and photovoltaics were 459.335, 49.778, 35.192, 43.191, and 1,1122 billion kilowatt-hours, respectively, up 10.69%, 26.94%, 9.46%, 16.50%, and 54.17% year-on-year.

Among them, the year-on-year increase in thermal power feed-in volume was mainly due to the year-on-year increase in electricity demand in the first quarter. The year-on-year increase in hydropower feed-in power was mainly due to improvements in incoming water from the region, and the year-on-year increase in new energy feed-in capacity was mainly due to an increase in the installed scale of new energy sources. In terms of feed-in tariffs, as of March 31, 2024, the company's average feed-in tariff was RMB 476.35 per megawatt hour (tax included), a year-on-year decrease of about 2.73%. In the first quarter of 2024, the company's market-traded electricity volume was about 52.113 billion kilowatt-hours, accounting for about 87.05%.

Coal and electricity profits are expected to continue to rise, green power installations are growing rapidly, maintaining the “buy” rating. Currently, the thermal coal market supply is relatively adequate, and the thermal coal supply and demand situation is biased towards easing. Combined with the increase in feed-in electricity from renewable energy sources squeezing demand for thermal power, we expect coal prices to remain low in 2024, and the company's coal power profitability is expected to continue to improve. At the same time, the company is actively promoting the green energy transition, and the installed scale of new energy sources and feed-in electricity are rapidly increasing. Under a trend where thermal power profits continue to improve and the scale of new energy sources continues to grow, we expect the company's operating performance to grow steadily. We expect the company's net profit to be 5.525 billion yuan, 5.810 billion yuan, and 6.219 billion yuan respectively from 2024 to 2026. After deducting interest on perpetual bonds, the company's net profit to mother will be 40.25, 43.10, and 4.719 billion yuan, corresponding to EPS of 0.22 yuan/share, 0.23 yuan/share, and 0.25 yuan/share, maintaining a “buy” rating.

Risk analysis

Risk of rising coal prices: Since the current policy target of the COPPCC coal compliance rate does not reach 100%, fuel costs for thermal power are still affected by fluctuations in coal prices in the market. If coal prices rise sharply at this stage, it will cause fuel costs for thermal power to rise.

Risk of new energy installations falling short of expectations: New energy power generation installations are affected by multiple factors such as policy guidelines, downstream demand, and upstream material prices. The installed capacity growth rate is uncertain, and there is a risk that the installed capacity growth rate will fall short of expectations.

Risk of a decline in regional utilization hours: Due to factors such as economic transformation, China's electricity demand fluctuates to a certain extent. If China's electricity demand weakens in the future, then there is a risk that the number of hours used for thermal power will decline. Furthermore, wind power and photovoltaics are affected by fluctuations in incoming wind and light conditions from year to year, and the output situation fluctuates accordingly. If wind and light are poor in the year, or if the power grid's absorption capacity is limited, there is a risk that the number of hours used by wind power and photovoltaics will decline.

Risk of falling electricity prices: After the Shenzhen Reform Commission comprehensively promoted the entry of thermal power into market-based trading and relaxed the range of electricity price fluctuations, electricity prices in the market remained high for a long time due to the relationship between supply and demand in the market and high coal prices. There is a risk that electricity prices in the thermal power market will fall if there is an oversupply of electricity or a subsequent decline in coal prices, and the coal-fired power cooperation mechanism is actually implemented to guide thermal power companies to reduce fuel costs.