Huaneng International released its 2023 annual report. The company achieved operating income of 254.397 billion yuan, +3.11% year-on-year; net profit to mother was 8.446 billion yuan, +214.33% year-on-year.
The increase in electricity consumption has led to an increase in revenue, and the reduction in costs has greatly improved performance. In 2023, the company achieved operating income of 254.397 billion yuan, +3.11% year-on-year; net profit to mother was 8.446 billion yuan, +214.33% year-on-year.
The increase in revenue was mainly due to the company's completion of 447.856 billion kilowatt-hours of domestic feed-in electricity in 2023 (+5.33%), resulting in a year-on-year increase of 9.762 billion yuan in domestic electricity sales revenue (+5.09% increase); the sharp improvement in performance mainly benefited from falling coal and gas prices, and the company's domestic fuel costs decreased by 14.201 billion yuan (8.77%) year on year. Looking at a single quarter, 23Q4 achieved operating income of 63,075 billion yuan, +0.48% year-on-year; net profit to mother was 4.118 billion yuan, -19.54% year-on-year. In 2023, the company plans to pay a cash dividend of 0.20 yuan (tax included) per share, with a dividend ratio of 57.14%.
The overall profit of thermal power was restored, and the month-on-month recovery in coal prices plus depreciation dragged down Q4 performance. In 2023, the company's coal and electricity sector achieved a total profit of 433 million yuan (+102.50% year over year), and the electricity profit was 0.001 yuan/kilowatt-hour, an increase of 0.049 yuan/kilowatt-hour over the previous year, turning an overall loss into a profit. Looking at Q4 alone, the total profit achieved by the company's coal and electricity sector is -0.03 billion yuan, and the electricity profit is -0.033 yuan/kilowatt-hour. It is expected to be mainly affected by the month-on-month recovery in Q4 coal prices and the company's fixed asset impairment losses of 2,002 billion yuan for its six coal-fired power plants.
The decline in electricity prices led to a slight narrowing of the profit landscape, but it still contributed to the main performance. In 2023, the company's wind power feed-in capacity was 31,835 million kilowatt-hours (+16.14% year over year), achieving total profit of 5.913 billion yuan (-5.16% year over year), electricity profit 0.186 yuan/kilowatt-hour, a year-on-year decrease of 0.042 yuan/kilowatt-hour; PV feed-in electricity volume was 10.911 billion kilowatt-hours (+81.67% year over year), achieving total profit margin of 2,044 billion yuan (+78.08% year over year), and estimated profit margin Narrow is mainly due to the continued advancement of climate parity, which has led to a decline in feed-in tariffs. In total, the new energy sector achieved a total profit of nearly 8 billion yuan, accounting for more than 60% of the company's total profit. In 2024, the company plans to spend 64.925 billion yuan on capital, +32.4% over the same period last year. Scenery installed capacity is expected to maintain high growth and will continue to be the main support for the company's performance growth.
Profitability improved markedly, and operating cash flow increased year-on-year. The company's gross sales margin in 2023 was 12.12%, +9.07pct year on year; the net sales margin was 3.57%, +7.66pct year on year. Sales/management/R&D/ finance rates were 0.09%/2.53%/0.6%/3.49%, respectively, +0.02pct/+0.25pct/-0.05pct/-0.36pct. The sharp decline in financial rates was mainly due to a decrease in the capital costs of the company's interest-bearing debt, which led to a year-on-year decrease of 10.2 billion yuan in interest expenses. The company's net operating cash flow was 45.497 billion yuan, an increase of 12.678 billion yuan (+39.91% year over year), mainly affected by a combination of lower fuel procurement expenses, increased electricity sales revenue, and a year-on-year decrease in renewable energy subsidies and VAT withholding tax rebates received in previous years.
Profit forecasting and valuation. Electricity reform is progressing in depth, and a coal-electricity price mechanism has been introduced to stabilize thermal power profits; new energy installed capacity and power generation are expected to maintain a high growth rate in 2024, and “turning green” will accelerate implementation, and will continue to release performance. The company's net profit for 2024-2026 is estimated to be 120.12/137.56/14.719 billion yuan, up 42.2%/14.5%/7.0% year-on-year, respectively. The PE corresponding to the current stock price is 12.0x/10.5x/9.8x, respectively, maintaining the “gain” rating.
Risk warning: Coal costs are higher than expected, project construction progress falls short of expectations, and cash recovery falls short of expectations.