Core views:
Incident: According to the Stock Exchange, on May 17, CITIC Financial Asset Listed Company (increased its holdings by 12.65 million shares at an average price of HK$3.52 per share, accounting for 0.1% of the total share capital, involving HK$44.58 million), currently holds 5% of the company's shares. China Power Investment Group, the majority shareholder of the company, also continued to increase its holdings. At the end of 2023, SDIC held 63.7% of the company's shares. The shareholding structure continues to be optimized.
China Power Investment's largest power platform, the asset structure continues to be optimized. The company is the largest listed electricity company under China Power Investment. At the end of 2023, the company's installed capacity reached 45 GW (38 GW of equity installed capacity), of which 34 GW of clean energy, accounting for 75.4% (+10.5 pct year on year).
In 2023, it achieved main revenue of 44.3 billion yuan and net profit to mother of 3.084 billion yuan (+16.5% year-on-year), and performance continued to improve. In 2023, Scenery's total net profit reached 4.6 billion yuan (+69.7% YoY); wind power/photovoltaics plan to add 4.5/2.5 GW in 2024, and clean energy will account for 78% + of installed capacity.
The development of thermal power has gone to waste, and improvements in incoming water are expected to release results. In recent years, on the one hand, the company divested thermal power, which had serious losses, to participate in coal-power joint ventures, and on the other hand acquired the Group's high-quality clean energy assets.
The net profit of the thermal power sector in 2023 has reached 1,315 billion yuan (up 2.7 billion yuan over the previous year), and the profit from power generation is 2.3 points (2 points in the first half of the year). Profits will continue to rise as coal prices fall this year. Water has dried up over the past two years, and the hydropower profit base is low (net profit loss of 826 million yuan in 2023). 2024M1-4 hydropower sales have increased sharply by 79.6% year-on-year, and we are optimistic that hydropower profits will increase significantly during the year.
Profit forecasting and investment advice. The company's net profit from 2024 to 2026 is estimated to be 44.91, 56.80, and 7.016 billion yuan, respectively. According to the latest closing price, PE is 8.91, 7.05, and 5.71 times, respectively, and only 0.72 times the 2024 PB (0.98 times after deducting 15.2 billion yuan of perpetual bonds). The company is a leading domestic electricity company, with continuous improvement in asset quality and diversified development of scenery, water and fire storage.
Referring to the peer valuation level, the company was given 10 times PE in 2024, corresponding to a reasonable value of HK$3.96 per share, maintaining a “buy” rating.
Risk warning. Coal prices continue to rise; construction and utilization hours for new energy projects fall short of expectations, etc.