Event: The company publishes its 2023 annual report and the first quarter 2024 report. In 2023, the company achieved operating income of 26.485 billion yuan, an increase of 11.23% over the previous year, and achieved net profit of 7.181 billion yuan, up 0.94% year on year, slightly higher than our previous expectations. In the first quarter of 2024, the company achieved operating income of 7.899 billion yuan, a year-on-year increase of 15.26%, and realized net profit to mother of 2,422 billion yuan, an increase of 0.10% year-on-year, lower than our expectations.
Wind power and photovoltaic power generation continued to increase, and hydropower performance was reduced by reducing the number of hours combined with a reduction in installed capacity. According to the company's operating data announcement, in 2023, the company completed 55.179 billion kilowatts of electricity, an increase of 14.12% over the previous year. Among them, wind power generation was 38.956 billion kilowatts, up 14.75% year on year; photovoltaic power generation was 15.354 billion kilowatts, up 14.23% year on year. The increase in wind power and photovoltaic power generation is due to the increase in the installed capacity of the company's holdings. By the end of 2023, the cumulative installed capacity of the company's wind power and solar power reached 1941.66 and 1982.42 million kilowatts, accounting for 4.40 and 3.25% of the national wind power and photovoltaic power generation industry market share respectively. In terms of the hydropower business, the company reduced its hydropower installed capacity by 12,600 kilowatts due to transfers and other reasons, and no new installed capacity was added during the year. The number of hours of combined hydropower utilization decreased by 473h to 3803h over the same period last year, resulting in a 16.27% year-on-year decline in hydropower generation. The high increase in wind power and photovoltaic power generation offset the year-on-year decline in hydropower generation, and is still driving the company's high revenue growth.
Factors such as depreciation are dragging down profit growth, and the potential for electricity growth is expected to support long-term profit growth. The company's revenue growth rate reached 11.23% in 2023, and net profit to mother increased by 0.94% year-on-year, which is lower than the revenue growth rate. The main reasons are: (1) New grid-connected projects in 2022 were put into operation one after another in 2023, and depreciation and operating costs increased. (2) In December 2022, power generation companies began to accrue production safety costs, and operating costs increased net year-on-year. (3) The profit level of participating companies fluctuated, and investment income decreased by 47.48% year on year to 715 million yuan. In 2023, the company's wind power and photovoltaic cost growth rates were the same as or overtook the revenue growth rate. Among them, wind power revenue and cost growth rates were 9.97% and 23.12%, respectively; PV revenue and cost growth rates were 13.42% and 13.41%, respectively. 1Q24 was affected by the increase in depreciation of newly put into production units and profit and loss of minority shareholders, and the company as a whole again showed “no increase in revenue but no increase in profit”. The company is in a period of rapid asset expansion. Depreciation and operating cost pressure in the short term greatly affect the pace of profit release. However, the company's new installed capacity has maintained a steady increase. It is optimistic that after the impact of short-term factors weakens, the company's long-term profit growth rate will accelerate.
Subsidy repayment was poor, and net cash flow from operating activities declined. In 2023, while the company's revenue scale and profits maintained positive growth, the company's net cash flow from operating activities fell 14.23% year on year to 14.417 billion yuan, mainly due to a year-on-year decrease in subsidy payments for new energy projects. As of the end of 2023, the company's renewable energy electricity price additional portfolio book balance reached 36.020 billion yuan, and the company's accounts receivable increased sharply by 37.21% year on year. Accounts receivable continued to grow in the first quarter of 2024, reaching $40.07 billion, an increase of another $3.403 billion compared to the end of 2023. Subsidy repayments fall short of expectations and affect the overall profit quality of the enterprise. Long-term subsidy repayments are expected to improve the company's operating cash flow.
Profit forecast and valuation: Based on the performance of the company's 2023 annual report and 2024 quarterly report, considering that the company's installed capacity in 2023 slightly exceeded our previous estimates, we raised the company's 2024-2025 net profit forecast to be 77.52 billion yuan and 8.717 billion yuan respectively (7.601 billion yuan and 8.514 billion yuan before adjustment, respectively), and added net profit to mother for 2026 to 9.538 billion yuan. The current stock price corresponds to PE at 17 times, 16 times, and 14 times, respectively, maintaining a “buy” rating.
Risk warning: The number of hours used by wind power and photovoltaics falls short of expectations, and there have been adverse changes in electricity price policies.