Sichuan Province is one of the leading hydropower companies, and it enjoys a favorable time and location for large hydropower investments. Sichuan Investment Energy specializes in many hydropower plants such as the Uchitianwan River in Sichuan Province, shares in hydropower resources in the Yalong River (48%) and Dadu River (20%) basins, and participates in investment businesses such as optical fiber cables. The actual controllers of the company are the Sichuan Provincial State-owned Assets Administration Commission (holding 45.1%), and Changjiang Electric Power holds 9.9% of the shares. By the end of 2023, the company's total installed capacity/equity installed capacity reached 3653/16.14 million kilowatts. The company achieved net profit of 4.4 billion yuan in 2023, YOY +25%; of which investment income was 4.81 billion yuan and YOY +23%.
The efficiency of hydropower and photovoltaics has improved, and the clean energy landscape continues to expand. The company relies on the Tianwan River, Tsing Yi River, Tianquan River and other basins to develop high-quality hydropower. The Yinjiang Hydropower Station (6*65MW) under construction is expected to be fully put into operation by the end of '25. The amount of electricity that can be developed is 1,57/ 1.83 billion kilowatts. We estimate that the net profit will be about 0.7/120 million yuan. The company is actively expanding new energy generation and regulation capacity building. In 2023, the photovoltaic power generation capacity was YOY +173%, and obtained the right to develop a 1.2 million kilowatt Pingshan pumped energy storage project.
The integrated water and landscape layout of the Yalong River is being accelerated. The company holds 48% of the shares in Yalong River Basin Hydropower Development Co., Ltd., and Yalong River Company's net profit for 23 years was 8.66 billion yuan, contributing 4.2 billion yuan to investment income. 2023/24Q1, the Yalong River feed-in tariff is 0.310/0.328 yuan, YOY +11%/4.5%. Affected by incoming water, the Yalong River's power generation fell by 4.1 billion kilowatts to 84.2 billion kilowatts in 23; the total amount of hydropower that can be studied in transit, including Liangyang, is 89.7 billion kilowatts (excluding joint scheduling). If incoming water is restored to a researchable level, it is expected to increase net profit by 1.36 billion yuan.
Hydropower research estimates are generally conservative. In 16-21, the average amount of electricity generated at power stations (excluding Liangyang) can be increased by 4% (3.1 billion kilowatts); we believe that the combined increase in power generation between the two estuaries (an average of 10.2 billion kilowatts over the years) is expected to gradually be reflected after incoming water is repaired. According to the company's official website, the Yalong River Water Scenery Base is planned to install 78 million kilowatts in the basic phase, including 39 million kilowatts of hydroelectricity+ savings and 39 million kilowatts of scenery. Focus on the increase in scenery (due to low water consumption pressure in Sichuan, profits are generally good). It is estimated that the Yalong River will contribute 47/49/5.3 billion investment income in 24-26 (assuming that incoming water from the Yalong River gradually recovers).
The Dadu River's scarce installed capacity is increasing, and consumption is expected to gradually improve. In 23Q1, Sichuan Investment Energy increased its shareholding in Guoneng Daduhe by 10% (transaction consideration of RMB 4,013 billion), and the share ratio increased to 20%. By the end of 2023, the Dadu River will be transporting 11.74 million kilowatts of hydropower, 3.52 million kilowatts of power, and the upstream Shuangjiangkou (2 million kilowatts) will be put into operation in 25 years, contributing 6.6 billion kilowatts of joint modulation capacity; Jinchuan, Shaping Level 1, and Chuantouba Level 2 (1.52 million kilowatts in total) will also be put into operation in 25-26. The power generation/net profit of the Dadu River in 2023 was 45.2 billion kilowatts/1.92 billion yuan respectively; the Dadu River is expected to contribute 4.5/48/580 million yuan in investment income in 24-26.
Profit forecasting and valuation. The company is expected to achieve net profit of 52/ 55/ 60 billion yuan in 24-26 years, corresponding EPS of 1.06/1.12/1.22 yuan. Referring to the 24-year PE valuation of comparable companies, the company was given 19-21 times PE in 24 years, corresponding to a reasonable value range of 20.14-22.26 yuan. The first coverage was given an superior rating over the market. Risk warning. Risk of incoming water drying up; risk of feed-in tariff fluctuations; risk of consumption of new energy sources.