[Core Conclusion] We predict that in 2024-2026, the company's net profit due to mother will be 0.609, 0.899, and 1.133 billion yuan, EPS 0.53, 0.78, 0.99 yuan, PE 10, 7, and 5 times, giving the company 14 times PE in 2024. The target price is 7.42 yuan/share for the first time covered, giving it a “buy” rating.
[Report Highlights] The market believes that the company follows the rise and fall of the macroeconomic economy and the new energy boom. We believe:
1) Stock distribution networks are scarce local provincial power grid assets, with stable profitability and significantly underestimated value; 2) Positioning Jinneng Holding Group's clean energy platform, with sufficient potential to lay out a scenic base+balance sheet.
[Main logic]
1. Stock distribution networks are scarce local provincial power grid assets. Their profitability is stable and their value is significantly undervalued.
1) The main body of the company's distribution network business is local electricity. The business model is clear (electricity purchase execution barge price, electricity sales execution catalogue price), good growth (2017-2023 revenue CAGR is 15.76%, net profit CAGR is 23.82%), and profitability is stable. 2) We selected Fuling Electric Power, a listed company with the same distribution network assets and distribution business. Whether in terms of the scale of electricity sales, volume of electricity sales revenue, or profitability, the quality of Tongbao Energy's distribution grid assets is significantly higher than Fuling Electric Power. Based on the PE average value that Wind's unanimous expectations, Tongbao Energy's reasonable valuation of distribution grid assets alone is 10.4 billion yuan, which is significantly undervalued compared to the current value. 3) The company integrated coal and electricity through a 23% shareholding in Yushupo Coal Industry. It has a strategic vision and conforms to industry trends. The investment income for 2021-2023 was 0.26, 0.34, and 0.29 billion yuan, respectively, accounting for 141%, 40%, and 42% of net profit to mother.
2. Positioning Jinneng Holding Group as a clean energy platform, laying out a scenic base+sufficient balance sheet potential.
1) The company is based on thermal power, and the 2022 strategic positioning was adjusted to Jinneng Holding Group's clean energy listing platform, with 0.15 GW wind power projects and 0.50 GW photovoltaic projects. 2) The controlling shareholder Jinneng Holding Group is rich in clean energy assets, 1.35 GW of wind power and 1.07 GW of photovoltaics. It can be expected that the assets will be injected into listed companies when the time is ripe. 3) The company and Jinneng Holding Group jointly established Jinbei Energy Company to invest in the construction of the Jinbei base. The company's net operating cash flow is steady and the balance sheet is strong. Assuming that the company's balance ratio rises to 60%, it can invest in an additional 2.47 GW photovoltaic project, which is 380% of the current project scale; if calculated according to the Jinbei base's new energy scale target of no less than 6GW, it is nearly 10 times the size of the existing project.
Risk warning: The profits of the power distribution business and landscape projects fall short of expectations, and fluctuations in coal prices affect investment returns, etc.