Key points of investment
Fujian Province is a power platform that is steadily advancing the transformation of new energy operations. The company is a power platform owned by Fujian Energy Group. It has steadily transformed from a traditional energy power supplier to a new energy supplier, successively developing renewable energy such as wind power, nuclear power, and photovoltaics. Among them, offshore wind power is the focus of the company's new energy transformation. According to the 2023 annual report, the company has a total installed capacity of 5.9939 million kilowatts, including 1.809 million kilowatts of wind power, 1.528 million kilowatts of natural gas power, 1.2961 million kilowatts of cogeneration, 1.32 million kilowatts of coal-fired pure condensation power generation, and 0.0408 million kilowatts of photovoltaic power generation.
Coal prices are in a lower range year-on-year and month-on-month, driving a further increase in the profitability of thermal power. Currently, coal prices are in a low range, which helps to further increase the profitability of thermal power. With 2024H1, the company completed a total heating capacity of 4.8648 million tons, an increase of 12.43% over the previous year, and completed a power generation capacity of 11.159 billion kilowatt-hours, an increase of 2.76% over the previous year. By rationally adjusting the ratio of heating and power generation, the company can further enhance the financial performance of its thermal power business. In addition, the company's ability to manage expenses has also improved. The cost rate during 2024Q1 fell to 7.8%, compared to -0.7 pct in the same period last year. This was mainly due to lower financial costs.
Fujian Province's ocean wind resources are high quality, and offshore wind power is developing rapidly. Thanks to active policy promotion, China's offshore wind power is currently experiencing rapid growth, and as the rush to install has subsided, related construction costs have also been significantly reduced. Furthermore, large-scale production of offshore wind turbines has further promoted cost reduction, which will undoubtedly have a positive impact on the profit prospects of offshore wind operators. Fujian Province is rich in offshore wind power resources, and the number of hours used for offshore wind power projects is high. Although in the past the bidding mechanism for the Fujian Sea Wind project caused the winning price to be as low as 0.2 yuan/kilowatt-hour, which affected the profitability of the project, with the optimization of the approval process, cost reduction, and Fujian's leading wind energy resources, the return on investment for new offshore wind projects in Fujian Province is expected to increase further in the future, thereby significantly boosting the cash flow and profit situation of seabreeze operators.
Multiple energy can be promoted and actively expanded, and long-term growth can be expected. 1) Thermal power: The company strengthened the layout of the thermal power sector. In the second half of 2023, the company increased its capital by 0.683 billion yuan to control shareholder Qiao Thermal Power (Yuanquanhui Power Generation), and is currently constructing a 2*0.66 million kilowatt cogeneration unit. At the same time, it is actively seeking the Dongqiao Thermoelectric Phase II 2*0.66 million kilowatt thermoelectric project and the Jinjiang Gas and Electricity Phase II gas power generation project. 2) Sea Breeze: At the end of 2023, the company and Three Gorges Fujian Energy Investment jointly invested in the establishment of Funeng Haiyun, which is developing a 0.65 million kilowatt seabreeze project in Changle Waihai District J. 3) Savings: The company obtained approval for Magnolia's 1.4 million kilowatt savings, Huashan 1.4 million kilowatt savings project, and Dongtian's 1.2 million kilowatt pre-development work permit. 4) Nuclear power: The company is collaborating with the Nuclear Power Company to advance the construction of the Ningde Nuclear Power Phase II 2*1.21 million kilowatt project, and advance the preliminary work of the Huaneng Xiapu 4*1.25 million kilowatt and 1*0.6 million kilowatt nuclear power project and the National Nuclear (Fujian) 6*1.5 million kilowatt nuclear power project.
Profit forecast and valuation: The company is expected to achieve revenue of 15.253/15.904/17.29 billion yuan respectively in 2024-2026, up 3.80%/4.27%/8.71% year-on-year; net profit to mother was 2.984/3.212/3.565 billion yuan, respectively, up 13.76%/7.64%/10.97% year-on-year, respectively, and corresponding PE was 8/8/7 times. As a new energy power enterprise in Fujian Province, the company has vigorously developed offshore wind power and has significant competitive advantages. In the future, the company will actively expand new energy power generation, and its performance is expected to maintain a growing trend. First coverage, giving a “buy” rating.
Risk warning
Feed-in electricity prices have fluctuated greatly, fuel costs have risen, and the wind has fallen short of expectations.