Core views:
Incoming water has dried up, hydropower is under pressure, and the results of reducing thermal power losses in the first quarter have exceeded expectations. The company issued a quarterly annual report. In 2023, the company achieved net profit of 1,226 billion yuan (-61.8% year over year), mainly due to the depletion of incoming water from the watershed and a decline in hydropower generation, but reduced losses from thermal power and landscape growth contributed to profit growth. At the same time, the company continued to optimize its debt structure. Although the balance ratio increased to 55.4%, comprehensive financing costs fell to 2.84%, and financial expenses fell 20.2% year on year in 2023. The company's two dividends totaled 1,576 billion yuan in 2023, with a dividend rate of 129%, corresponding to the latest closing price of 3.2%. Net profit for 24Q1 was 430 million yuan (+46% year over year), and profit increased more than expected in the face of the decline in hydropower.
As incoming water is abundant and dry, average electricity prices have risen. Incoming water from the Hongshui River Basin was 5-6 percent dry in 2023, and the company's hydropower generation capacity was 21.1 billion kilowatt-hours (-41.5% year-on-year). The water supply remained subdued since 24Q1. The Q1 company's hydropower generation capacity was -7.4% year-on-year. There has been an improvement since the second quarter. It is expected that incoming water recovery will bring about performance elasticity. Thermal power insurance and supply increased output. In '23, thermal power generation increased by 44.9% year on year, and installed electricity production of new energy plants increased 19.3% year on year. According to the company's annual report, starting in 2021, Guangxi abolished a number of hydropower profit reduction policies, such as a 10% reduction in hydropower prices during the peak period. The company's average electricity price gradually rebounded, and the hydropower feed-in price was 0.263 yuan/kilowatt-hour in 2023 (+2.2% compared to the same period last year).
Promote the integrated construction of watershed water and landscape, and open up a second growth point. Since 2021, the company has been developing new energy construction, relying on the Hongshui River Cascade Power Station. In 2023, the company spent 3.52 billion yuan on new energy capital and put into operation 0.47 GW of new energy installed capacity. According to the company's operating announcement, as of the end of December, the company's installed wind power was 0.79 billion GW and 0.66 GW, respectively. The total power generation capacity in 2023 was 2.39 billion kilowatt-hours (+19.3% year over year), and 2024Q1 generated 82 million kilowatt-hours (+37.5% year over year).
Profit forecasting and investment advice. The company's net profit from 2024 to 2026 is estimated to be 32.4/35.5/3.84 billion yuan, respectively, and the PE corresponding to the latest closing price is 15.1/13.8/12.8 times, respectively.
The value of high-dividend allocation is outstanding, and there is plenty of room for new energy growth. Referring to peer valuation, the company was given a 24-year PE valuation of 20 times, corresponding to a reasonable value of 8.23 yuan/share, maintaining a “buy” rating.
Risk warning. Fluctuations in incoming water; fluctuations in feed-in tariffs; project construction falls short of expectations, etc.