Incident: 1) The company released its 2023 annual report. In 2023, the company achieved operating income of 1.73 billion yuan, a year-on-year decrease of 3.3%, and realized net profit to mother of 0.679 billion yuan, a year-on-year decrease of 6.9%, exceeding our expectations. 2) The company released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved operating income of 0.465 billion yuan, a year-on-year decrease of 16.1%, and realized net profit to mother of 0.213 billion yuan, a year-on-year decrease of 22.2%, in line with our expectations.
The decline in revenue is better than the decline in power generation, and the expected profit in 2023 exceeds expectations mainly due to the better-than-expected power generation structure. In 2023, the company achieved 2.94 billion kilowatt-hours of power generation, a year-on-year decrease of 8.4%. Among them, Fujian wind power achieved 2.53 billion kilowatt-hours, a year-on-year decrease of 11.6%. However, judging from the changes in the number of hours used, the company's Fujian Seabreeze utilization hours in 2023 was 3,905 hours, a year-on-year decrease of 133 hours, yoy -3.3%. Fujian's landwind utilization hours were 2,744 hours, a year-on-year decrease of 584 hours, yoy -17.5%. The decline in the company's wind power generation in 2023 was mainly brought about by onshore wind power. The decline in the power generation capacity of the Sea Wind project was better than expected. The change in the power generation structure also caused the company's feed-in electricity prices in Fujian to rise by nearly 2 cents. In addition, the company's financial expenses in 2023 also decreased by 0.03 billion yuan year-on-year, and the company's profit was better than expected under the combined influence of the two.
Wind resources are poor, and the company's profit declined significantly in the first quarter of 2024. 2024Q1 achieved a power generation capacity of 0.8 billion kilowatt-hours, a year-on-year decrease of 17.45%. Among them, Fujian wind power achieved 0.703 billion kilowatt-hours, a year-on-year decrease of 17.1%, and Heilongjiang wind power achieved 0.071 billion kilowatt-hours, a year-on-year decrease of 14%. Under this influence, the company only achieved net profit of 0.213 billion yuan in the first quarter, a year-on-year decrease of 22.2%.
The Group promised to inject a 1.2GW seabreeze target and a 1.2GW savings target to ensure the sustainability of the company's profits in the next few years. In order to avoid competition in the industry, the Group promised to take the opportunity to inject its remaining power companies into listed companies. In 2019, the Group carried out its promise to inject a total of 0.298 million kilowatts of offshore wind projects for the first and second phase of the Putian Pinghai Offshore Wind Farm owned by Zhongmin Haidian, helping to increase the company's installed capacity and profits dramatically. Since some projects have not yet been put into operation, the 2019 Group once again promised that “any entity in Fujian Investment Offshore Power, Fujian Investment Power, Fujian Investment Pumped Energy Storage, Ningde Fujian Investment, or Xiapu East Fujian will start the asset injection process within one year after achieving profit within a full fiscal year, no compliance issues, and meeting the listing conditions”. These power companies have an ocean wind index of 1.21 million kilowatts (of which 0.31 million kilowatts have been put into operation, 0.3 million kilowatts have been approved and not put into operation), and a pumped energy storage index of 1.2 Million kilowatts (already in production), a commitment that guarantees the company's installed capacity and profit growth over the next few years.
In the future, the Fujian Sea Wind approval method is expected to be more reasonable, and it is expected that high returns will be obtained when wind resources are high quality and costs are reduced. From the perspective of yield, in the past, the bid price for the Fujian Sea Wind project was the main one, and the winning electricity price dropped to around 0.2 yuan/kilowatt-hour, causing the profitability of the Seabreeze project to be lower. It is expected that in the future, the approval method for Fujian Province will be more reasonable. Against the backdrop of falling costs and the number one wind resource in the country, the yield of new projects in Fujian Province is expected to increase dramatically in the future. Currently, the winning bid price for offshore fans (including towers) has dropped to 3,680 yuan/kW, which is almost lower than the highest price in 2021. If the Internet can be accessed at an affordable price, the operating profit of the sea breeze project is extremely impressive. We estimate the IRR capital of more than 15%. In 2023, the Group added 0.3 million kilowatts (Changle Offshore Zone I project). In addition to the aforementioned Fujian Investment Offshore Power Company, the Putian Pinghai Bay Phase III and Xiapu Area B projects owned by the Group in 2019, the company expects to add about 1 GW of sea breeze in the future, doubling the company's current scale. These projects are highly certain and are expected to be put into operation (or injection) one after another in the next few years. Looking forward to the future, in the context of the acceleration of Haifeng approval in Fujian Province, the company is expected to continue to obtain new projects to ensure continued profit growth.
Profit forecast and rating: Regardless of asset injection, we maintain the company's 2024-2025 net profit forecast of 0.693 and 0.704 billion yuan, respectively, and added the 2026 net profit forecast of 0.77 billion yuan, with year-on-year growth rates of 2.1%, 1.7%, and 9.3%, respectively. The PE corresponding to the current stock price is 13, 13, and 11 times, respectively, and continues to maintain a “buy” rating.
Risk warning: The risk of electricity prices falling due to the participation of new energy projects in market-based transactions, asset injections fall short of expectations