Incident: The company released its 2023 annual report and 2024 quarterly report. For the full year of 2023, the company achieved revenue of 78.1 billion yuan, up 13.4% year on year (after adjustment); realized net profit of 27.2 billion yuan, up 14.8% year on year (after adjustment); 24Q1 achieved revenue of 15.6 billion yuan, up 1.6% year on year, and achieved net profit of 3.97 billion yuan, up 9.8% year on year.
Incoming water is under pressure, and electricity prices are rising due to black and white injection. In 2023, the incoming water from Udongde was 5.5% cooler than the same period last year, and the Three Gorges incoming water was 0.7% higher than in the same period last year. Affected by the depletion of incoming water, the company's total annual power generation capacity in 2023 was about 276.3 billion kilowatt-hours, an increase of 5.3% over the previous year. Among them, Wudongde/Baihetan/Xiluodu/Xiangjiaba/Three Gorge/Gezhouba power generation was -4.6%/+43%/-5%/-1.3%/+1.3%/+1.5%, respectively. 24Q1 Wudongde water was 7.7% cooler than in the same period of the previous year, and the Three Gorges incoming water was 4.1% cooler than the same period last year. In terms of electricity prices, due to the mainly market-based pricing of the injected Wubai hydropower plant, the company's overall average feed-in price for hydropower in 2023 was 281.3 yuan/megawatt-hour (tax included), an increase of 11.56 yuan/megawatt-hour over the previous year.
The size of interest-bearing debt increased, and the financial expense ratio was +8.2pp year-on-year. In 2023, the company's gross margin reached 57.8%, and the net profit margin reached 35.8%, a year-on-year decrease of 5.79pp. Among them, sales/management/finance/R&D expenses were 0.25%/1.8%/16.1%/1.0%, respectively, -0.07pp/-0.49pp/+8.22pp/+0.84pp, respectively. In 2023, the company's financial expenses were 12.6 billion yuan, an increase of 2.98 billion yuan over the previous year. This was mainly due to the increase in the size of interest-bearing debt in the merger and acquisition of Yunchuan Company and the costing of interest expenses after Baihetan was fully put into operation during the reporting period.
The cash flow advantage is significant, with a cash dividend ratio of 73.4%. In 2023, the company's operating cash flow reached 64.7 billion yuan, an increase of 212 billion yuan over the previous year, mainly due to the recovery of electricity bills. The company plans to pay a cash dividend of 0.82 yuan/share, with a dividend ratio of 73.7%, which remains stable.
Profit forecasting and investment advice. The company is expected to achieve net profit of 328, 365, and 39 billion yuan in 24-26, corresponding EPS of 1.34/1.49/1.59 yuan respectively, maintaining a “buy” rating.
Risk warning: risk of incoming water falling short of expectations, risk of extreme weather, risk of electricity price fluctuations.