Revenue performance grew steadily in 2023, and the injection of the Wubai power plant led to an increase in power generation and feed-in tariffs.
In 2023, the company achieved revenue of 78.11 billion yuan (+13.4%); net profit to mother of 272.4 yuan (+14.8%); of these, 2023Q4 achieved revenue of 20.26 billion yuan (+28.2%); and net profit to mother of 5.72 billion yuan (+87.0%). Benefiting from the injection of the Wubai Power Station in early 2023, although incoming water from the Yangtze River Basin was generally poor in 2023, the total power generation capacity of the company's six cascade power plants was about 276.3 billion kilowatt-hours, +5.3% year-on-year; the company's average feed-in price was 0.281 yuan/kilowatt-hour, an increase of 5.0% over the previous year. By the end of 2023, the company's installed capacity of controllable hydropower was 71.755 million kilowatts.
In 2023, the company's investment income increased 3% year-on-year, and the cash dividend ratio was 74%. In 2023, while continuing to strengthen and improve the main hydropower business, the company actively carried out strategic investments in upstream and downstream industrial chains and related emerging fields. It achieved annual investment income of 4.75 billion yuan (+3.3% year-on-year), added about 3.3 billion yuan in foreign equity investment, and accumulated an original investment balance of about 57.4 billion yuan by the end of the year. In 2023, the company's cash dividend (tax included) was 20.064 billion yuan, accounting for 73.66% of net profit to mother and 0.82 yuan per share. Based on the latest closing price, the dividend rate was 3.2%.
2024Q1 performance has maintained steady growth, and poor intake water has affected power generation. 2024Q1 achieved revenue of 15.64 billion yuan (+1.6%); net profit attributable to mother of 3.97 billion yuan (+9.8%); net profit after deducting non-return to mother of 3.98 billion yuan (+11.5%). The total power generation capacity of the six cascade power plants in 2024Q1 was about 52.75 billion kilowatt-hours, a decrease of 5.1% compared to the same period last year; the total amount of incoming water from the Wudongde Reservoir in the upper reaches of the Yangtze River was 7.7% lower than in the same period of the previous year; the total amount of incoming water from the Three Gorges Reservoir was 4.1% lower than in the same period last year.
The 2024Q1 net interest rate increased year-on-year, mainly due to a decrease in financial expenses and an increase in investment income.
2024Q1, the company's gross margin was 48.14%, -1.36pct year on year; net margin was 26.06%, +1.79pct year on year, mainly benefiting from the 2.21pct year-on-year decrease in financial expenses ratio. In addition, the company's investment income in 2024Q1 was 90 billion yuan, an increase of 55.7% over the previous year, which to a certain extent made up for the performance gap caused by poor incoming water supply.
Investment suggestion: Considering that the company's six warehouses will help smooth out incoming water fluctuations and increase power generation. At the same time, the company is actively promoting the integrated development of water, landscape and solar storage, and future performance is expected to grow steadily. We basically maintain the 2024-2025 profit forecast and add the 2026 profit forecast. The 2024-2026 EPS is expected to be 1.40/1.48/1.56 yuan, corresponding PE is 18.5/17.4/16.6x; the company will be given 20.5-21.5 times PE in 2024, corresponding to a reasonable value of 28.6-30.0 yuan/share. There is 11%-16% premium space compared to the current stock price, and maintain a “buy” rating.
Risk warning: Incoming water falls short of expectations, electricity prices have dropped sharply, policy changes, pumping and storage projects have fallen short of expectations.