The company's 1Q2021 performance increased slightly by 0.80% year-on-year, slightly lower than expected. It is expected that the unit price of standard coal in the furnace may increase by about 25% compared with the same period last year, completely offsetting the contribution of the rise in the main volume and price of power generation and financial cost savings. The company's net profit from 2021 to 2023 is expected to be 50.1 billion yuan, 54.4 billion yuan and 5.77 billion yuan, maintaining the target price of 5.60 yuan / 3.90 Hong Kong dollars and "buy" rating.
1Q2021 EPS 0.095 yuan, slightly lower than expected. The company released its quarterly report for 2021, with operating income of 29.263 billion yuan, an increase of 32.31% over the same period last year, and net profit of 1.199 billion yuan, up 0.80% over the same period last year. If the impact of 261 million yuan of interest on perpetual debt is taken into account, the core net profit of the company is 938 million yuan, down 4.27% from the same period last year; the company's EPS is 0.095 yuan, down 4.04% from the same period last year; and the performance is slightly lower than expected.
Electricity prices are rising, and high coal prices are squeezing gross margins. 1Q2021, the company's power generation capacity was 59.901 billion kWh, an increase of 28.67% over the same period last year, which was higher than the national average thermal power growth rate of 21.1%, mainly due to rapid repair at a low base. Among them, thermal power / hydropower / wind power / photovoltaic power generation increased by 28.4%, 0.6%, 58.0%, 13.4% respectively over the same period last year. The company's market-oriented electricity accounted for 52.91%, an increase of 6.21% over the same period last year, mainly due to the stagnation of transactions in many places affected by the epidemic in the same period last year. Despite the increase in the share of transactions, the company's comprehensive electricity price still rose 1.84% to 419.71% compared with the same period last year, reflecting that the kilowatt-hour discount situation may be improved as a result of tighter power supply and demand. Despite the improvement in revenue, the company's gross profit margin fell 4.9 percentage points year-on-year to 11.6%, gross margin fell 250 million yuan year-on-year, and we estimate that the company's unit price of standard coal may rise by about 25% year-on-year. Since April, spot coal prices in Qinhuangdao continue to be high, and it is expected that the cost side of the industry and the company may still be under pressure.
Financial expenses are saved compared with the same period last year, resulting in performance compensation. The net operating cash flow of the company's 1Q2021 was 4 billion yuan, down 37.9% from the same period last year, mainly due to upward coal procurement. The company's 1Q2021 final asset-liability ratio fell 2.5 percentage points to 59.4% compared with the same period last year, reflecting the impact of debt repayment and sustainable debt replacement, resulting in a year-on-year saving of 18.4% or 230 million yuan to 1.01 billion yuan in financial expenses, basically making up for the decline in gross profit and promoting a return to apparent performance.
Scenery new installation planning is considerable, is expected to optimize the company's business model. We expect the company to add about 25GW wind turbines during the 14th five-year Plan period, when the installed proportion of new energy is expected to increase from the current 25% to 45%, and its profit share is expected to increase compared with the same period last year, so as to stabilize the volatility of ROE, reflect the sustained growth of performance, and optimize the valuation system. Considering the sharp price reduction of onshore turbines so far this year and the long-term potential of significant cost reduction of Fengfeng, we are optimistic that the rate of return of the company's new units will steadily exceed the capital IRR standard of 6%.
Risk factors: coal prices rose significantly more than expected; comprehensive feed-in electricity prices fell sharply; online electricity consumption was significantly lower than expected; wind power photovoltaic resource reserves and installed capacity growth was lower than expected
Investment suggestion: taking into account the impact of the recent high coal price trend, we downgrade the company's 2021-2023 EPS forecast of 13%, 12%, 11%, to 0.40, 0.44, 0.44 and 0.48 (the previous value is 0.46, 0.50, 0.54). The current price corresponds to the dynamic PE of A shares in 9-8-7, the dynamic PE of H shares in 5-5-4, and the "Buy" rating of A shares at 5.60 yuan / 3.90 Hong Kong dollars.