Key points of investment
Event: Yongtai Energy released the 2023 Annual Report and the 2024 First Quarter Report. For the full year of 2023, the company achieved operating income of 30.120 billion yuan, a year-on-year decrease of 15.29%; net profit to mother was 2,266 billion yuan, an increase of 18.67% over the previous year. In the first quarter of 2024, the company achieved operating income of 7.321 billion yuan, an increase of 3.58% year on year; net profit to mother was 467 million yuan, an increase of 11.41% year on year.
Coal business: Production and sales have risen steadily, and capacity expansion has been implemented efficiently.
In 2023, the company's coal business production and sales continued to grow. Raw coal production was 12.9723 million tons, up 17.58% year on year, of which refined coal production was 3.2899 million tons, down 2.30% year on year; raw coal sales were 12.9937 million tons, up 17.98% year on year, of which refined coal sales were 3.276 million tons, down 3.27% year on year. In the first quarter of 2024, the company's refined coal production and sales gradually returned to normal levels. The output was 674,400 tons, up 8.63% year on year; sales volume was 617,800 tons, up 7.42% year on year. Affected by sluggish downstream demand, coal prices continued to be under pressure. The company's coal business sales revenue for the first quarter of 2024 was 2.180 billion yuan, a year-on-year decrease of 18.15%. The Haizetan coal mine project belonging to the company has fully started construction, and the overall progress of the project has been accelerated. It is planned that the conditions for coal extraction will be met in the third quarter of 2026, and production will be achieved in 2027. The Haizetan coal mine has a resource reserve of 1,145 million tons, producing high-quality chemical coal and thermal coal. The production capacity is expected to increase to 10 million tons/year after completion of the modification. According to the company's preliminary estimates, after completion, it can achieve annual revenue of about 9 billion yuan and net profit of about 4.4 billion yuan, and lay a solid foundation for the company's integrated development of coal and electricity.
Electricity business: The complementary results of coal and electricity have been remarkable, and the addition of installed capacity highlights advantages.
In 2023, the company's electricity business achieved operating income of 16.711 billion yuan, an increase of 6.28% year on year; benefiting from falling coal prices, lower procurement costs, and operating costs decreased by 11.18% year on year, driving gross margin increase of 17.55 pct year on year. In terms of electricity capacity, in 2023, the company completed power generation of 37.349 billion kilowatt-hours, with feed-in power generation of 35.391 billion kilowatt-hours, up 4.16% and 4.10%, respectively; in the first quarter of 2024, electricity sales increased dramatically, with completed power generation of 99.99 billion kilowatt-hours and 9.470 billion kilowatt-hours of feed-in electricity, up 14.15% and 14.23% respectively over the same period. In terms of installed capacity, the company obtained control of Danyang Zhongxin Huahai in 2023. The new installed capacity of 200,000 kilowatts was put into operation in May 2023. The total installed capacity exceeded 9 million kilowatts and increased to 9.184,400 kilowatts, an increase of 2.38% over the previous year, further enhancing the company's core competitiveness.
Energy storage business: The entire industry chain structure has been improved in an orderly manner, and the construction of new quality productivity has been accelerated.
In 2023, the company focused on promoting energy storage transformation. In terms of project construction, the 6000 tons/year high-purity vanadium pentoxide metallurgical production line of Dunhuang Huihong Mining Development Co., Ltd. started construction as scheduled at the end of June 2023. It is expected to be put into operation in the fourth quarter of 2024. After delivery, it will occupy about 20% of the domestic market share of coal and vanadium extraction; the company belongs to Zhangjiagang Detai Energy Storage Equipment Co., Ltd. 1000MW all-vanadium liquid flow battery energy storage equipment manufacturing base (phase 1 300MW) at the end of June 2023 Construction has begun. The first phase of the project is expected to be put into operation in the fourth quarter of 2024. After delivery, it will occupy about 10% of the current domestic market share of all vanadium liquid flow batteries. In terms of resource acquisition, the company obtained mining rights for the Longling Vanadium Mine in Shitai County, Anhui Province through equity mergers and acquisitions, increasing the average grade by 0.93%, and the amount of vanadium pentoxide resources confirmed by the review to 1,347,400 tons, further increasing the company's advantage in high-quality vanadium ore resources.
Profit forecasting and valuation
We expect the company to achieve net profit of 26.73/28.9/3.07 billion yuan in 2024-2026, an increase of 17.96%/8.13%/6.25% over the previous year; EPS is 0.12/0.13/0.14 yuan, corresponding PE is 11.22/10.38/9.77 times, maintaining the “increase” rating.
Risk warning
The decline in coal prices exceeded expectations; coal production fell short of expectations; the progress of the vanadium liquid flow battery project fell short of expectations