Key points of investment:
Incident: The company recently released its 2024 quarterly report and 2023 annual report: in Q1 2024, the company achieved operating income of 87.647 billion yuan, +0.7% /month-on-month -3.3%; realized net profit to mother of 15.884 billion yuan, -14.7% /month-on-month +39.0%; realized net profit without deduction to mother of 16.46 billion yuan, -11.2% /month-on-month +9.3%. In 2023, the company achieved operating income of 343,074 billion yuan, -0.4% year on year; realized net profit of 59.694 billion yuan, -14.3% year on year; realized net profit without deduction of 62,868 billion yuan, -10.6% year on year.
Taking advantage of resource endowments, coal production and sales increased in Q1 in 2024 1) Volume: In 2024, the company gave full play to its resource endowment advantages. In this context, the company gave full play to its resource endowment advantages. Q1 coal production and sales were 8,130/117.1 million tons, +1.5%/+8.8% year-on-year; among them, annual Changxie/monthly Changxie/spot/Kengkou sales accounted for 50%/31.3%/13.8%/4.9%, respectively. 2) Due to weak coal price performance, the company's average Q1 coal sales price (excluding tax) was 573 yuan/ton, down 7.7% year on year. 3) Profit: The unit production cost for self-produced coal in Q1 was 190.6 yuan/ton, +12.5% year over year; the gross margin of the coal business was 28.9%, -4.8 pct year on year.
The power generation business continued to expand, and power generation volume continued to rise in Q1 in 2024 1) Volume: The total installed capacity of Q1 in 2024 was 553.5/52.16 billion kilowatt-hours, respectively; the total installed capacity of Q1 power generation reached 44,801 megawatts, and Q1 added 167 megawatts of installed capacity, of which 87 megawatts were added; the average number of hours used for power generation was 1,236 hours, -3.7% year-on-year. 2) The average electricity sales price was 409 yuan/megawatt-hour, -2.6% compared with the same period last year. 3) Profit: The average electricity sales cost for the power generation business was 364.8 yuan/megawatt-hour, -3.0% year over year; gross margin was 16.9%, +0.8 pct year on year.
The advantages of integration are highlighted. The coal business remained stable in '23, and the profit of the power generation business increased 1) Volume: coal production/sales volume in 2023 was 32/450 million tons, +3.5%/+7.7% year-on-year; of these, annual Changxie/monthly Changxie/spot/Kengkou sales accounted for 57.5%/24.4%/13%/5.1%, respectively, +4.5pct/-7.6pct/+3.5pct/-0.4pct; power generation/electricity sales were 2,122.6/19.75 billion kilowatt-hours, respectively, year-on-year + 11.0%/+11.1% 2) The average sales price of coal (excluding tax) was 584 yuan/ton, down 9.3% year on year; the average sales price of electricity was 414 yuan/MWH, -1% year on year. 3) The gross margin of the coal business was 32.04%, -3.88pct; the gross margin of the power generation business was 16.91%, +2.6pct year on year.
Continued steady returns to investors. The long-term investment value of high dividends shows that the company continues to return investors at a high level. In 2023, the company plans to distribute cash dividends of 22.6 yuan (tax included) to all shareholders for every 10 shares, totaling 44.903 billion yuan (tax included), accounting for 75.2% of the net profit of the mother. In 2020-2022, the company's dividend rates were 91.88%, 100.4% and 72.77%, respectively, and the dividend ratio continued to lead the industry average.
Profit forecasting and investment advice
Due to the company's outstanding integrated advantages and steady profit performance, the coal business achieved low-cost operation, and the power generation business continued to expand. The company's net profit expectations for 24-25 and the additional 26 years were raised to 614.59/640.73/66.63 billion yuan respectively. The previous net profit to mother for 24-25 was 606.71/63.366 billion yuan, corresponding to EPS of 3.09/3.22/3.35 yuan/share. Considering the integrated operation of the company, which has superior coal resource endowments and the coal business has the advantage of low cost operation and scale; moreover, the company has steady operation, sufficient capital and strong resilience to risks, and the continuous stability of a high percentage of dividends shows long-term investment value; superimposed market value management assessments are expected to further improve the valuation of “moderately rated” central enterprises, including the company. While raising the company's profit expectations, considering that the company's valuation is being reshaped, the company's rating was raised to a “buy” rating.
Risk warning
(1) Coal consumption fell short of expectations; (2) coal imports exceeded expectations; (3) market electricity prices fell short of expectations.