Description of the event

The company released its 2023 annual report and 2024 quarterly report: in 2023, the company achieved operating income of 56.712 billion yuan, an increase of 12.32% over the previous year; realized net profit of 6.705 billion yuan, an increase of 64.31% over the previous year. In the first quarter of 2024, the company achieved operating income of 14.108 billion yuan, an increase of 6.43% over the previous year, and realized net profit of 2,035 billion yuan, an increase of 26.14% over the previous year.

Incident comments

The main business operation was completely restored, and the annual performance was excellent. Although water has continued to dry since 2023, the company's hydropower generation capacity was 94.206 billion kilowatt-hours, a year-on-year decrease of 5.03%, but thermal power completed 58.06 billion kilowatt-hours, an increase of 14.93% over the previous year, and the growth rates of wind power and photovoltaic power generation reached 31.75% and 60.36%, respectively. Under the strong performance of thermal power and new energy, the company's total power generation capacity was 161.973 billion kilowatt-hours, an increase of 3.35% over the previous year. In terms of electricity prices, due to the year-on-year increase in electricity transmission prices outside the Yalong River and the increase in the share of electricity from high-price power units such as Lianghekou and Yangfanggou power stations, the company's hydropower feed-in price was 0.3 yuan/kilowatt-hour, an increase of 10.29% year on year. Due to the high level of spot electricity prices in the provinces participating in thermal power in 2022, the price of thermal power decreased by 1.46% year on year. Overall, electricity volume and electricity prices maintained strong performance, achieving annual revenue of 56.712 billion yuan, an increase of 12.32% over the previous year. Due to the steady decline in coal prices combined with the year-on-year increase in hydropower prices, the company's gross margin reached 36.08%, an increase of 4.04pct year-on-year. At the same time, the company continued to promote the replacement of high-interest debt, and financial expenses were reduced by 14.59% year over year. Furthermore, thanks to the restoration of the operations of participating companies, investment income reached 697 million yuan, an increase of 155.33% over the previous year. However, since the depreciation amount of overseas Singaporean assets reached 200 million yuan, the amount of impairment of the company's credit and assets reached 398 million yuan, which dragged down performance to a certain extent. Overall, driven by the continuous restoration of the main power business, the company achieved net profit of 6.705 billion yuan throughout the year, an increase of 64.31% over the previous year. Among them, the net profit attributable to shareholders of listed companies contributed by Yalong River Hydropower reached 4.5 billion yuan, an increase of 17.49% over the previous year. The company plans to pay a dividend of 0.4948 yuan (tax included) per share, accounting for about 55% of net profit attributable to mother, and maintain a steady level of dividends.

Thermal power operations continued to recover, and performance in the first quarter was excellent. In the first quarter of 2024, incoming water from Sichuan and Yunnan continued to dry. The company's hydropower generation capacity was 21,434 billion kilowatt-hours, a year-on-year decrease of 8.31%; thermal power benefited from improved demand in the region and the commissioning of new units, which reached 15.161 billion kilowatt-hours, an increase of 17.7% over the previous year; wind power and photovoltaics grew 15.95% and 135.15%, respectively. In terms of electricity prices, the company's average feed-in tariff for hydropower in the first quarter was 0.318 yuan/kilowatt-hour, up 4.26% year on year; the average feed-in price for thermal power was 0.463 yuan/kilowatt-hour, down 1.91% year on year. Under the strong performance of thermal power and hydropower prices, the company's total power generation capacity was 39.542 billion kilowatt-hours, up 3.27% year on year; feed-in electricity prices were 0.387 yuan/kilowatt-hour, up 3.75% year on year. As a result, the company's revenue for the first quarter reached 14.108 billion yuan, an increase of 6.43% year on year. In terms of cost, the coal supply and demand situation relaxed in the first quarter, and coal prices continued to decline. The average market price of Q5500 thermal coal in Qinhuangdao Port in the first quarter was 901.74 yuan/ton, a year-on-year decrease of 20.1%. The continued decline in coal prices will significantly release the pressure on the cost side of thermal power. The company's gross margin for the first quarter was 40.28%, up 2.78 pcts year over year. At the same time, the company's three-fee expenses continued to decline, and investment income reached 195 million yuan, an increase of 81.24% over the previous year, driven by the restoration of the operating environment of participating companies. Overall, the company's net profit for the first quarter reached 2,035 billion yuan, an increase of 26.14% over the previous year. Against the backdrop of dry incoming water, the performance was steady.

Investment advice: According to the latest financial data, we expect the company's corresponding EPS in 2024-2026 to be 1.06 yuan, 1.14 yuan, and 1.24 yuan, respectively, and the corresponding PE will be 14.34 times, 13.37 times, and 12.33 times, respectively, maintaining a “buy” rating.

Risk warning

1. The risk that the progress and benefits of the commissioning of new construction projects fall short of expectations;

2. Wind conditions and lighting resources fall short of expected risks.