1Q24 results are basically in line with our expectations
The company announced 1Q24 results: revenue of 15.05 billion yuan, +2.3% year on year; net profit to mother of 906 million yuan, -11.1% year over year, mainly due to non-monetary asset exchanges at the end of 2023, which included the right to be converted into assets (Chuaneng Power stock rights) into other non-current assets. The current period was measured by fair value, affected by falling stock prices, and lost 238 million yuan from changes in fair value. After excluding this influencing factor and other non-recurring profit and loss, the 1Q24 net profit was +10.6% year-on-year.
Development trends
The growth rate of power investment was impressive, and the company's power generation equipment production continued to increase. According to the National Energy Administration i, the country's major power generation companies completed investment of 136.5 billion yuan in power supply projects in January-March, an increase of 7.7% over the previous year.
1Q24 achieved a total output of 10.20 GW of power generation equipment, +62.95%. Among them, steam turbine generator sets and wind turbines achieved an output of 8.99/0.94 GW, +133.78%/-15.69% compared to the same period, and power plant boilers/steam turbines achieved 6.22/3.22 GW respectively, or -1.69%/-45.95%.
Continued bid wins to explore the market, and the steady increase in new orders supports the company's performance growth. The company added orders of RMB 26.329 billion in 1Q24, up 16.4% year on year. Among them, clean and efficient energy equipment/renewable energy equipment/engineering and trade/modern manufacturing services/emerging growth industry business achieved orders of 111.24/68.06/28.70/25.07/3.023 billion yuan respectively, +30.89%/+11.12%/+20.21%/-11.60%. The company's ii1q24 hydropower market won bids for pumped energy storage projects such as Mulan, Yanling, Tai'an Phase II, Lianghekou, and Pankou; the coal/gas power market accounted for 41%/100%. Wind power has continuously won bids for large-scale projects such as China Power Construction's Huarun Lianjiang Offshore Wind Farm and Inner Mongolia Energy Erlian 1GW Wind Storage Project, with a total project capacity of over 1,200 MW.
Net operating cash flow recovered year on year, increasing investment in R&D. The company's 1Q24 gross margin/net margin was 20.0%/6.0%, respectively, +0.6/-0.9ppt. The company increased R&D investment. The R&D expense ratio was +0.5ppt to 4.1% year over year, and the company's net operating cash flow in 1Q24 was 1.24 billion yuan, +148.66% year-on-year.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current A share price corresponds to the 2024/2025 price-earnings ratio of 13.0 times/10.2 times. The current H share price corresponds to the 2024/2025 price-earnings ratio of 7.1 times/5.3 times. A-shares remain outperforming the industry rating and target price of 19.00 yuan, corresponding to 14.3 times the price-earnings ratio of 2024 and 11.3 times the price-earnings ratio of 2025, with 10.3% upside compared to the current stock price. H shares maintained an outperforming industry rating, but due to the recovery of the Hong Kong stock market, we raised our target price by 44.4% to HK$13.00, corresponding 8.7 times the 2024 price-earnings ratio and 6.6 times the 2025 price-earnings ratio. There is 22.9% upside compared to the current stock price.
risks
The growth rate of power investment fell short of expectations, and the rise in raw material costs exceeded expectations.