Description of the event
The company issued an announcement on power generation and feed-in tariffs for the first quarter of 2024: In the first quarter of 2024, the company completed a cumulative total of 56.164 billion kilowatt-hours of power generation, a decrease of about 0.19% over the same period last year; the average feed-in price was about RMB 509.31 per megawatt hour.
Incident comments
Electricity is stable and electricity prices are under pressure, and the income of the main electricity industry may be under pressure. In the first quarter, the company completed a total power generation of 56.164 billion kilowatt-hours, down about 0.19% year on year. The decline in electricity volume was mainly affected by the decline in electricity capacity in Hunan and Hubei power plants. Among them, Hubei's power generation capacity in the first quarter was 6.577 billion kilowatt-hours, a year-on-year decrease of 24.11%, mainly due to the impact of the large hydropower generation in Hubei Province squeezing thermal power output space; the total power generation capacity of the company's Hunan coal power plant in the first quarter was 3.892 billion kilowatt-hours, down 9.02% year on year.
In addition to the pressure on coal and electricity, the company completed 4.289 billion kilowatt-hours of electricity generation in the first quarter, an increase of 5.38% over the previous year; completed hydropower generation of 1,011 billion kilowatt-hours, an increase of 24.81% over the previous year. In terms of electricity prices, the company's average feed-in electricity price in the first quarter was about 509.31 yuan/megawatt-hour, a year-on-year decrease of 4.06%. The main reason for the year-on-year decline in electricity prices was medium- to long-term and spot electricity prices in Shandong in the first quarter. The average monthly medium- to long-term electricity price in Shandong Province in the first quarter was 0.3654 yuan/kilowatt-hour (excluding capacity compensation), down 0.01 yuan/kilowatt-hour from year on year. The average monthly spot price in Shandong Province was 0.24131 yuan/megawatt-hour (excluding compensated capacity price), a year-on-year decrease of 0.1104 yuan/kilowatt-hour When. Overall, although electricity consumption remained stable, the year-on-year decline in electricity prices may put some pressure on the company's main electricity business revenue in the first quarter.
The significant drop in coal prices will dominate the company's performance. Since 2024, the coal supply and demand environment has been marginally relaxed. In the first quarter, the Qinhuangdao Port Q5500 coal liquidation price was 901.74 yuan/ton, a year-on-year decrease of 20.12%. Therefore, although there is some pressure on the revenue side of the company's main electricity business, the sharp year-on-year decline in coal prices is expected to dominate the company's thermal power performance in the first quarter. Furthermore, the company's participation in Huadian Xinneng is expected to maintain a high level of overall performance, driven by the addition of new installed equipment last year, so the investment income contributed is also expected to achieve steady growth. Although coal prices declined in the first quarter, production capacity was not effectively released throughout the year due to its participation in the coal business last year, so as its progress in the resumption of work and production progresses steadily, the investment income contributed by the coal business is also expected to achieve steady performance. Therefore, overall, cost recovery will dominate the company's operating performance in the first quarter. Driven by steady growth in combined investment income, the company's performance outlook for the first quarter is positive.
Projects under construction are progressing steadily, and the asset structure is being optimized at an accelerated pace. By the end of 2023, the company still had 6.536,800 kilowatts of projects under construction, including 6.238 million kilowatts of thermal power projects. After the project is completed and put into operation, the company's installed capacity will increase by 11.18%, and abundant projects will guarantee the company's steady growth in the long term. Furthermore, the company's balance ratio at the end of 2023 was 62.62%, down 5.83 percentage points from the previous year, and the asset structure was optimized at an accelerated pace.
Investment advice and valuation: According to the company's latest financial data, we adjusted the company's profit forecast. The EPS for 2024-2026 is 0.62 yuan, 0.70 yuan, and 0.79 yuan, respectively, and the corresponding PE is 11.18 times, 9.93 times, and 8.82 times, respectively, maintaining the “buy” rating.
Risk warning
1. There is a risk that electricity supply and demand will deteriorate;
2. There is an unseasonal risk in coal prices.