Results release: In '23, the company achieved revenue of 14.70 billion yuan, YOY +2.6%; net profit to mother of 2.62 billion yuan, YOY +1.1%. The 24Q1 company achieved revenue of 3.09 billion yuan, YOY +0.5%; net profit to mother of 530 million yuan, YOY -1.1%.

With a low base in 23 years, wind resources disrupted electricity volume declined in 24Q1, and incoming wind is expected to recover throughout the year. In 2023, the company's power generation capacity was 24.19 billion kilowatt-hours, YOY +8.3%, of which thermal power, land wind, and sea wind power generation capacity was 186.5/23.4/3.16 billion kilowatt-hours; the estimated utilization hours of land wind and sea wind were 2565 and 3518 hours, respectively, -402 and +149 hours. 2024Q1's power generation capacity is 5.33 billion kilowatt-hours, YOY +2.4%, of which thermal power, land wind, and sea wind power generation capacity is 38.1/6.3/860 million kilowatt-hours; the estimated utilization hours of land wind and sea wind were 696 and 959 hours, respectively, -137 and -55 hours. Assuming 2,700 hours of land wind utilization in '24 (2967/2565h for '22/'23) and 3550h for sea breezes (3369/3518h for '22/23, respectively), it is estimated that the wind power sector is expected to increase profits of about 70 million yuan over '23.

Optimistic about declining coal prices in '24 unleashed performance elasticity. The average liquidation price of Q5500 thermal coal at Q5500 in 24Q1 was about 903 yuan/ton, a year-on-year decrease of 227 yuan/ton. We expect that with the increase in the company's share ratio and the decline in market coal prices, the company's performance flexibility is expected to be further released. Assuming that the company's annual coal price (standard coal included) falls by 100 yuan/ton and the company's electricity price falls slightly by 0.01 yuan, it is estimated that the company's net profit from coal-fired power generation is expected to be further restored to 0.036 yuan, an increase of 0.016 yuan over the previous year, and the net profit of the thermal power sector is expected to increase by about 150 million yuan.

Promote the construction of thermal power projects, and continue to deepen the comprehensive energy transformation. (1) The company holds 51% of Dongqiao Thermal Power's 2 660,000 kilowatt thermal power projects. The estimated annual power generation capacity is 5.76 billion kilowatt-hours after operation. According to the net profit of 0.03 yuan per kilowatt hour of electricity, the project is expected to increase the company's net profit of 88 million yuan after operation, assuming that the corresponding performance will be released in '26. At the same time, the company will actively seek the Dongqiao Thermoelectric Phase II 2×660,000 kilowatt thermoelectric project and the Jinjiang Gas Power Phase II gas power generation project. As the profitability of thermal power stabilizes, additional thermal power units are expected to contribute to relatively stable profits and the flexibility of the power system. (2) Since July 2023, the consortium formed by the company and the Three Gorges has won the bid for the Fujian 950,000 kilowatt seabreeze project, and its participation in the 10% Ningde nuclear power project has been approved by the State Council, Magnolia Savings and Huaan Storage have been approved one after another, and the company's comprehensive energy transformation has continued to deepen.

Profit forecasting and valuation. In addition to the increase in profits in the wind power and thermal power sector, we expect that the decline in the company's financial expenses and the recovery of thermal power profits through shareholding are expected to increase the company's net profit by about 0.7/10 billion yuan in 24, respectively.

We expect the company's 2024-26 EPS to be 1.17/1.22/1.39 yuan. Referring to the comparable company's 2024 16 times PE valuation, we temporarily gave the company 13-15 times PE in 2024, corresponding to a reasonable value range of 15.21-17.55 yuan, maintaining the “superior to the market” rating.

Risk warning. The decline in coal prices fell short of expectations; wind resources fluctuated; and the commissioning of the project fell short of expectations.