Results fell short of expectations in 2023 due to poor intake water. In 2023, the company achieved operating income of 44.262 billion yuan, an increase of 1.31%; profit attributable to equity holders of the company was 3.084 billion yuan, an increase of 16.48% over the previous year; and realized net profit of 2.66 billion yuan, an increase of 7.23% over the previous year. The lower-than-expected performance was mainly due to the historic decline in the watershed where the company's hydropower station is located in 2023, leading to a loss of 830 million dollars in hydropower; in addition, minority shareholders account for a relatively high share of the company's newly acquired scenery assets, and the share of net profit attributable to mother decreased. In 2023, the company plans to pay 0.132 yuan/share, with a dividend ratio of 61%, maintaining a high dividend ratio.

Renewable energy installations and profits have increased significantly. As of December 31, 2023, the company's consolidated installed capacity reached 45.02 GW, an increase of about 42% over the previous year, and the share of clean energy was close to 75%. Among them, hydropower, wind power, and photovoltaics increased by about 0.5/4.8/7.9 GW, respectively, over the same period last year. In 2023, the wind power business achieved net profit of 3.116 billion yuan, an increase of 82.5% over the previous year, and the photovoltaic business achieved net profit of 1,504 billion yuan, an increase of 46.9% over the previous year. The increase in new energy installed capacity led to an increase in profit. The company plans to add about 4.48 GW of wind power installations and 2.5 GW of photovoltaic installations in 2024. Clean energy will account for 90% of the installed capacity in 2025. The new installed capacity is expected to bring continuous and steady profit growth to the company.

The decline in coal and electricity combined with coal-power joint ventures has paid off, and profits in the thermal power sector have improved dramatically. Through coal-power joint ventures with China Coal Group, the company continuously optimizes coal and electricity assets and enhances profitability. Coal prices generally showed a downward trend in 2023. The unit fuel cost for the company's coal power was 285.51 yuan/megawatt-hour, down 12.46% from the same period last year; the average coal consumption for electricity supply was 298.72 grams/kilowatt-hour, down 1.21% from the same period last year. The release of pressure on the cost side has led to a significant improvement in profits. The net profit of the thermal power sector reached 1.32 billion yuan for the whole year, reversing a year-on-year loss of 27.1 billion yuan. It is expected that there will still be room for a slight decline in coal prices in 2024. Capacitive electricity prices will help improve profit stability, and thermal power profits are expected to recover further.

Profit forecast and investment advice: We expect the company's 2024-2026 revenue to be RMB 523/577/62.2 billion, respectively, and net profit to mother of RMB 50.3/66.0/7.69 billion yuan, maintaining the target price of HKD4.72 and maintaining the “superior to the market” rating.

risks

1) The new installed capacity was lower than expected; 2) the number of hours used was lower than expected; 3) The price of market-based electricity was lower than expected.