Event: The company released financial results for the first quarter of 2023 and 2024. In 2023, the company achieved total operating income of 30.12 billion yuan, -15.9%; net profit of 2,266 billion yuan, +18.67%; net profit after deduction of non-return to mother of 2,366 million yuan, +41.73%; in a single quarter, Q4 achieved operating income of 8.141 billion yuan, -6.4% YoY, +1.8% YoY; net profit to mother of 642 million yuan, +74.5% YoY, +5.1% YoY; net profit without return to mother of 742 million yuan, +96.71% YoY. In the first quarter of 2024, the company achieved total operating income of 7.321 billion yuan, +3.58% year on year; net profit to mother of 467 million yuan, +11.41% year over year; net profit after deducting non-return to mother of 471 million yuan, +12.04% year on year.
Coal business: Prices are compensated by volume, and profits are steady. 1) In 2023, the company achieved raw coal production/commercial coal sales of 1297/12.99 million tons, +17.6%/+18%. The price of commercial coal tons was 872.5 yuan/ton, -27.7% year-on-year, and the cost of a ton of coal was 390.42 yuan/ton, or -13.6% year-on-year. On a quarterly basis, Q4 Company's raw coal production/commercial coal sales volume was 343/3.4 million tons, +23.2%/+18.8% year over year, and -1.7%/-3.1% month over month. 2) In the first quarter of 2024, raw coal production/commercial coal sales reached 240/2.37 million tons, +0.5%/-1.8% year-on-year, and overall production and sales remained stable.
Electricity business: Volume and price have risen sharply, and costs have dropped significantly. 1) In 2023, the company achieved electricity generation capacity of 37.349 billion kilowatt-hours, +4.2% year over year; achieved sales volume of 35.391 billion kilowatt-hours, with electricity prices of 0.4722 yuan/kilowatt-hour, +2.1% year over year, benefiting from the increase in Changxie coal cashout and falling thermal coal prices. The company's electricity cost was 0.4217 yuan/kilowatt-hour, -14.7% year over year. The gross margin of the company's electricity business in 2023 was 10.68%, reversing losses compared to -6.87% in 2022; on a quarterly basis, Q4 generated 9.05 billion kilowatts, +17.3% year over year, and -19.4% month on month, achieving sales volume of 8.58 billion kilowatts of electricity, +17.5% year-on-year and -19.4% month-on-month. 2) In the first quarter of 2024, power generation capacity was 99.99 billion kilowatts, and electricity sales reached 9.47 billion kilowatts, +14.2% year-on-year. In the first quarter, the unit price of standard coal purchased for the company's coal-fired power plants decreased by 156 yuan/ton over the same period last year, and fuel procurement costs were drastically reduced.
Key projects are progressing in an orderly manner, and future growth can be expected. In terms of coal, as of December 31, 2023, the four shafts of the Shaanxi Yihua Haizetan Coal Mine Project, which belongs to the company, have been excavated a total of 2168 meters. The overall project progress is one month ahead of schedule. It is expected that the conditions for coal extraction will be in place in the third quarter of 2026, and production will be achieved in 2027. The overall scale of coal production capacity will increase dramatically after production is put into operation, and the product structure may be optimized. In terms of energy storage, the company is progressing the construction of energy storage production lines in an orderly manner. The first phase of the 3,000 tons/year high-purity vanadium pentoxide metallurgical preparation production line and the 300 MW/year vanadium flow battery production line will be completed and put into operation in the fourth quarter of 2024, which is expected to start a second growth curve.
Profit forecast: We expect the company's 2024-2026 net profit to be 27/30/3.1 billion yuan, EPS 0.12/0.13/0.14 yuan, respectively, and PE 10.89/10.04/9.64 times, respectively, maintaining a “buy” rating.
Risk warning: Domestic economic recovery falls short of expectations; coal prices have declined beyond expectations; infrastructure fixed asset investment funds have fallen short of expectations