2024Q1 The revenue side performed steadily and the profit side performed well
In 2023, the company achieved operating income of 23.461 billion yuan, a year-on-year (adjusted) decrease of 0.51%; realized net profit to mother of 7.638 billion yuan, an increase of 5.58% year-on-year (adjusted). On the revenue side, in 2023, due to factors such as water depletion in the first half of the year and the conversion of power generation capacity in some reservoirs to energy storage, the company's power generation declined, down 4.04% year on year. The company's average settlement electricity price increased by 2.96% year on year in 2023, contributing to the company's overall revenue stability. From the profit side, in 2023, the company optimized the debt financing structure and carried out cost control through methods such as early replacement of existing debt with low-interest capital. Financial expenses were reduced by 14.14% year-on-year, promoting steady growth in the company's profits. With 2024Q1, the company achieved operating income of 4.42 billion yuan, an increase of 3.58% over the same period (after adjustment); net profit to mother of 1.065 billion yuan, an increase of 17.25% over the same period (after adjustment). 2024Q1 is affected by various factors such as the incomplete release of energy storage in some reservoirs, water storage at the Toba Hydropower Station, and large-scale commissioning of new energy sources in Yunnan Province. The company's power generation capacity decreased by 7.17% year on year. It is expected that the increase in feed-in tariffs will drive the company's revenue side performance to be relatively steady. From the profit side, the financing costs of 2024Q1's interest-bearing debt have been reduced, financial expenses have decreased, and the profit side has achieved relatively rapid growth.
The commissioning of the power plant brought about short-term performance flexibility, and the integrated development of scenery and water storage opens up long-term growth space. The company is the only platform for the final integration of Huaneng Group's hydropower business, and is uniformly responsible for the development of hydropower and new energy resources in the main stream of the Lancang River. By the end of 2023, the company had put into production an installed capacity of 27.53 million kilowatts, including 25.6 million kilowatts of hydropower and 1.93 million kilowatts of new energy. As projects such as the Toba Hydropower Station, the Jiaoliangbao Hydropower Station, and new energy are put into operation one after another, the company's installed capacity and power generation are expected to grow further during the “14th Five-Year Plan” period. The Tibet section of the upper reaches of the Lancang River has abundant solar resources. The company insists on putting equal emphasis on hydropower and new energy, and carries out “integrated scenery and water storage” sustainable development. During the “14th Five-Year Plan” period, it plans to build “double 10 million kilowatt” clean energy bases in the Yunnan and Tibet sections of the Lancang River, and the company has plenty of room for long-term growth.
Tight electricity supply and demand in the province supports the rise in electricity prices. Cost optimization is expected to further increase profits. Electricity consumption in Yunnan Province continued to grow. Electricity consumption in Yunnan Province continued to grow, reaching 11.7% in 2022. In 2023, due to poor incoming water and tight electricity supply, Yunnan Province cut electricity production for energy-intensive industries, and the electricity consumption growth rate fell to 5.1%. In 2023, the company's average settlement electricity price increased by 2.96% year on year, and the seasonal tight supply and demand of electricity in Yunnan Province is expected to continue to drive up the company's comprehensive electricity prices. On the cost side, as interest rates and corporate debt ratios declined in the past two years, the company's financial expense ratio continued to decline. In 2021-2023, it was 16.71%, 13.90%, and 11.64%, respectively. As the company's debt side continues to be optimized, the company's financial expense ratio is expected to decline further and increase the company's profits.
Profit forecasts and investment advice
The company is a leading hydropower enterprise and has the right to develop hydropower and new energy resources in the main stream of the Lancang River. In the short term, the successive commissioning of the Toba and Jiaoliangbao hydropower plants is expected to give the company short-term performance flexibility; in the long run, the integrated development strategy of Fengguang Water Storage is expected to open up room for long-term growth. The hydropower business brings high-quality cash flow and is expected to continue to support the company's large capital expenses. The company's net profit for 2024/2025/2026 is expected to be 9.33/9.97/10.8 billion yuan, a year-on-year growth rate of 22.2%/6.9%/8.3%; by the close of July 23, the company's current stock price corresponding to PE was 22.96 /21.47/19.83 times, respectively. Covered for the first time, the company was given an “increase in weight” rating.
Risk warning
Risk of incoming water falling short of expectations; risk of project progress falling short of expectations; risk of falling market electricity prices; risk of changes in industry policies.