Core views:

Benefiting from rising electricity prices and marginal improvements in electricity profits, performance turned losses into profits. The company disclosed its 2023 quarterly report, achieving revenue of 13.046 billion yuan (+14.6% year-on-year) and net profit of 88 million yuan to the mother (loss of 450 million yuan in the same period last year). 2023Q1's feed-in electricity capacity reached 24.9 billion kilowatt-hours (+5.9% year-on-year), of which coal/gas/wind power were 200/35/1.3 billion kilowatt-hours respectively; feed-in electricity prices during the same period was 585 yuan/megawatt-hour (+8.6% year-on-year), and fuel costs were 9.446 billion yuan (+4.5% year-on-year). It is expected that the rise in thermal power prices will cover the increase in fuel costs and the gross margin will return to 7.6%. In addition, investment income was 210 million yuan; net operating cash flow was 299 million yuan (-62 million yuan for the same period last year).

Improved imports and long-term partnerships may be core factors that have exceeded expectations, and thermal power profits are expected to continue to improve.

In terms of electricity prices, benefiting from the peak of electricity prices traded in Guangdong Province in 2023, the company's electricity prices still have room to rise; in terms of cost, the company's previous spot and import ratio was high, and the market already had expectations for feed-in electricity prices and spot coal prices. Factors that exceeded expectations may be the price advantage of coastal imported coal and the increase in the domestic Changxie coal ratio. Currently, domestic spot coal prices have fluctuated downward, from March 15 to the present (considering coal inventories), the average price of Qindao Q5500 coal fell by two yuan/ton compared to December 15 of the previous year to March 15 this year The quarter may have performed better. Furthermore, the company approved 8 GW of coal power and 2.1 GW of gas and electricity in 2022, and is optimistic about a triple increase in thermal power installation/electricity price/profit margin.

It is proposed to add 14 GW of scenery in the 14th Five-Year Plan. There are plenty of resources at hand, and we look forward to speeding up the installation and implementation. The company strives to add 14 GW of new energy installed in the 14th Five-Year Plan. At the end of 2022, the company's new energy installed capacity was 2.52 GW, so the installed CAGR in the next three years will reach 79.7%. The company has abundant resources at its disposal. The new energy projects under construction and approved are 3.32 and 10 GW respectively. Currently, module prices have fallen 13% from a high level. It is expected that Green Power's installation will accelerate. The company has multiple peak adjustment capabilities to effectively guarantee consumption.

Profit forecasts and investment recommendations. The company's net profit from 2023 to 2025 is estimated to be 1,383 billion yuan, 2,614, and 3.266 billion yuan respectively. According to the latest closing price, corresponding PE is 24.04, 12.71, and 10.18 times, respectively. The company has significant advantages in location resources and the integration of wind, light and fire storage, and made every effort to develop new energy sources in the 14th Five-Year Plan. Referring to peer valuation levels, the company was given 16 times the PE valuation in 2024, corresponding to a reasonable value of 7.97 yuan/share, maintaining the “buy” rating.

Risk warning. Coal prices continue to rise; construction and utilization hours for new energy projects fall short of expectations, etc.