3Q22 turned a loss into a profit, significantly benefiting from the rise in electricity prices
Construction Investment Energy 1-3Q22 achieved revenue of 13.8 billion yuan, +29% year on year, net profit of 285 million yuan, +139% year on year, net profit of 218 million yuan, +128% year on year; of these, 3Q22 had revenue of 4.99 billion yuan, +53% year on year, net profit of 344 million yuan, +139% year on year, net profit of 341 million yuan over the same period last year and +138% year on year. The company reversed losses in the 3rd quarter, mainly due to: 1) Feed-in electricity prices +57% year on year and +25% month on month in a single quarter; 2) the increase in the overall standard coal unit price was limited. The forecast for the increase in electricity prices and coal prices, the cost rate forecast for the reduction period was raised to 126/538/718 million yuan in 22-24 (previous value - 4.44/396/471 million yuan), and BPS 5.42/5.72/6.13 yuan (previous value: 5.11/5.33/5.59 yuan).
Comparable with the company's average PB value in '22 (Wind's unanimous forecast), the company was given 1.3xPb in '22, with a target price of 7.05 yuan/share (previous value of 7.15 yuan based on 1.4xPb in '22), maintaining the increase in holdings rating.
Power generation in 3Q22 turned positive year on year, and the increase in feed-in electricity prices exceeded expectations
Electricity supply and demand in Hebei Province are weak, and the company's power generation capacity in 1-3Q22 is -3.32% year-on-year. In the context of steady economic growth, electricity demand is expected to recover in the second half of the year; the company's generator sets are an important power source support for regional power grids, and power generation capacity is expected to rise when electricity is guaranteed, and the company's 3Q22 power generation capacity is +1.19% compared to the same period last year. The company's average feed-in electricity prices for 1-3Q22 was +36% year on year. We estimated that 3Q22 feed-in tariffs were +57% year on year and +25% month on month, mainly due to: 1) the increase in electricity prices traded in the Hebei regional market; 2) the high electricity prices generated by electricity transactions between the provinces peaking in July-August. The company's 3Q22 gross margin was +40pct year on year and +17pct month-on-month, and it is expected that the consolidated unit price of coal 3Q22 will increase relatively limited compared to the same period (1H22 +37%). The company's annual feed-in electricity prices is expected to be better than our previous expectations, raising the 22-24 electricity price forecast to 431/418/418 yuan/MWh.
Accelerating the deployment of clean energy, Duoneng complementarity is expected to improve the asset structure. In 1H22, the company fully established Jineng Renewable Energy Company to mainly develop clean energy projects in the Inner Mongolia Autonomous Region. At the end of June, the company purchased shares in Jianhao Company and further increased its capital to speed up entry into the photovoltaic power generation field; Jianhao Company obtained a PV index of 660 MW in Hebei/Shanxi/Shaanxi, etc., of which 310 MW is under construction and 350 MW is yet to be started. The company shares Green Energy Technology with a 25% share ratio to participate in the research and development of hydrogen liquefaction technology; the company is actively seeking the right to participate in savings projects. The company expects the Shouyang Thermal Power and Yangquan Thermal Power projects to be put into operation in the first half of 2023.
Slightly lower the target price to maintain the increase in holdings rating
With the arrival of the heating season, demand for coal increases, and the company's power generation and heating costs may rise; the amount of electricity traded between provinces with high electricity prices is somewhat occasional, and we don't expect a month-on-month increase in electricity prices in the fourth quarter; therefore, we believe that the company's net profit of 4Q22 returns to its mother may still be under pressure. The company's current stock price corresponds to 22-24 PB of 1.00/0.95/0.89x. Comparable with the company's 22-year PB average of 1.3x (Wind's consistent expectations), the company was given 1.3xPb in '22, with a corresponding target price of 7.05 yuan/share (previous value of 7.15 yuan based on 1.4xPb in '22), maintaining the shareholding increase rating.
Risk warning: Risk of rising coal prices; electricity demand falls short of expectations; progress of projects under construction falls short of expectations.