Incident: CITIC Financial Asset Management increased the company's shares to 5%. According to the latest data from the Hong Kong Stock Exchange, China CITIC Financial Asset Management Co., Ltd. increased its holdings of China Electric Power by 12.65 million shares, with an average price of HK$3.5243 per share, for a total amount of approximately HK$44.5824 million. After the increase in holdings, the latest number of shares held was approximately 619 million shares, and the latest shareholding ratio was 5%.
Central enterprise asset management companies continued to increase their holdings of the company to 5%, reflecting market capital's recognition of the company's value. We believe that the company has both high growth and high dividend attributes under the current stock price. Against the backdrop of an overall recovery in the Hong Kong stock market, it has high allocation value. CITIC Financial Asset Management increased its holdings of the company's shares to 5%, reflecting recognition of the company's long-term value. The company is the flagship platform of China Power Investment Group and proposes to build a world-class clean energy supplier. At the beginning of the company's listing, China Power Investment Group clarified its position and promised in writing that the company had limited acquisition and development rights for the Group's assets outside of Shanghai. Since 2022, the Group has provided 4 rounds of asset operation support for the company, including injecting high-quality assets and divestment of old coal power units. The intention to build a flagship platform around the company is obvious, laying the foundation for the company's high growth. At the same time, the company maintained an excellent dividend record. According to our profit forecast, assuming the company maintains a 50% dividend ratio in 2024, the dividend rate can reach 5.5%.
Asset quality continues to be optimized, the divestment of old coal and electricity units has achieved remarkable results, and the scale and profit volume of new energy sources have expanded rapidly. After establishing a clean transformation goal in 2021, the company made several optimizations to its coal and power assets. In particular, it was announced at the end of 2022 that it would transfer 60% of Xinyuan Fusion (holding 4.76 million kilowatts of coal and electricity installed capacity) to China Coal Group, divesting the company's main source of coal and electricity losses, and at the same time achieving a coal and power joint venture with China Coal Group. In 2023, the company's coal and electricity sector achieved a profit of 1,315 billion yuan, exceeding market expectations.
At the same time, the clean transformation is moving forward. By the end of 2023, the company had 15.149 million kilowatts of installed photovoltaics and 12.06 million kilowatts of wind power in operation. The growth rate of installed capacity is basically in line with the growth rate of profit, reflecting the strong profitability of new projects. The company plans to add about 4.5 million kilowatts of wind power and 2.5 million kilowatts of photovoltaics in 2024. The new installed capacity is mainly wind power, which is conducive to ensuring the yield of the project.
Due to the historic depletion of incoming water in 2023, performance fell short of expectations, and the company's operating indicators improved across the board from January to April 2024. The watershed where the company's hydropower is located showed historic decline in 2023. Annual hydropower sales decreased by 35.49% year-on-year, resulting in rare losses in the company's hydropower sector, with annual losses of 826 million yuan (including minority shareholders' profits and losses, same below). Judging from the historical situation, the average annual profit of the company's hydropower sector is around 800 to 10 billion yuan. According to the company's January-April 2024 business data announcement, in January-April, hydropower sales increased 79.64% year on year, wind power sales increased 52.1% year on year, photovoltaic electricity sales increased 88.03% year on year, and coal electricity sales increased 8.80% year on year. With improvements in incoming water, the increase in new energy installed capacity, and the double widening of coal power and ignition price differences, the company's 2024 performance is expected to improve significantly.
Profit forecast and valuation: We maintain the company's 2024-2026 net profit forecast of 48.01, 69.30, and RMB 8,029 billion, respectively. The current stock price corresponds to PE of 8, 6, and 5 times, respectively. We have analyzed the details of the acquisitions, and the Group's support has gradually increased to establish China Electric Power's flagship platform position. Currently, Hong Kong stocks have fully reflected the negative fundamentals of green power. The company's coal, electricity, hydropower, and new energy assets are of high quality, and the profitability of all business segments is expected to continue to improve, maintaining a “buy” rating.
Risk warning: Incoming water fluctuates, electricity prices fall short of expectations, and thermal electricity and coal prices are rising.