Incidents:
The company announced that it plans to invest 384.385 million yuan to acquire 50% and 1% shares of Xinfeng Power Generation from China Power Investment (Ganzhou) Energy and Xinfeng County Urban Investment Group respectively. After the acquisition is completed, Xinfeng Power will become the company's holding 51% of the shares. After completing the acquisition, the company will invest in the construction of the Xinfeng Power Plant Phase II coal-fired power project in Ganzhou, Jiangxi, with a total planned capital of 7.896 billion yuan. The preliminary work of the project has been completed, and the conditions for commencement of construction have been met.
Thermal power and coal mine project reserves have risen to the next level to ensure high growth in the next few years:
By the end of 2023, the company had 9.18 million kilowatts of electricity installed in operation and 22 million tons/year in coal production mines. The company has sufficient projects under construction and preparation to support future performance growth. In terms of coal, the east wing of the company's Yuanzigou coal mine (production capacity 2 million tons/year) was put into operation in the first half of this year; the company is building the Zhaoshipan coal mine (production capacity 6 million tons/year). Considering that the coal mine construction cycle is generally 5 years, we expect the mine to be put into operation in 2025; the company plans to build the Zhangba Coal Mine (production capacity 4 million tons/year); in addition, on April 11, the company competed for mining rights at the Qianyangshan Coal Mine in Huanxian County, Gansu Province, with a block area of 121.15 square meters and 10.2 coal resource reserves 100 million tons, the company's coal preparation capacity will rise again steps. In terms of electricity, the company's Shimizugawa Phase III second unit (1 million kilowatts) was put into operation in the first half of this year. Currently, the Yan'an Phase II Thermal Power Project (700,000 kilowatts), the Shangluo Power Plant Phase II project (1.32 million kilowatts), and the Zhaoshipan Power Plant Phase II project (2 million kilowatts) is expected to be put into operation between 2025 and 2027. According to the annual report, since the company's main power units are in the West-East transmission channel, the proportion of approved installations participating in West-East transmission has reached 48%. There is little fluctuation in the amount of electricity transmission and electricity prices. At the same time, the company benefits from coal-power integration and the advantages of Kengkou Power Station, and profitability is still guaranteed in the context of the commissioning of new projects.
The integration of coal and electricity guarantees high profitability, and this year's performance growth accelerated with the addition of new production:
Compared with traditional thermal power, integrated coal and electricity enterprises greatly reduce the operating risks caused by fluctuations in coal prices and ensure a long-term stable supply of fuel for power plants, thus making them more stable and profitable. In 2023, the company's electricity sector's gross profit reached 0.124 yuan/kilowatt-hour. Since the first Shimizugawa Phase III unit (1 million kilowatts) was put into operation in January of this year, leading to an increase in power generation, the east wing of the Yuanzigou Coal Mine (with a production capacity of 2 million tons/year) was also put into operation in the first half of the year. Accelerated growth in performance can be expected throughout this year.
With sufficient capital on hand combined with high-quality cash flow, the company actively rewards investors with dividends:
As of the first quarter of 2024, the company's monetary capital reached 6.689 billion yuan, while benefiting from stable profitability brought about by the integration of coal and electricity. The net cash flow from the company's operating activities in 2023 was 7.133 billion yuan, or 1.76 billion yuan. In the context of high profitability and high-quality cash flow, the company has achieved high dividends in the past two years, with a cash dividend of 1,313 billion yuan in 2022, a dividend ratio of 53.1%, and a proposed cash dividend of 1.35 billion yuan in 2023, with a dividend ratio of 52.8%.
After the company's thermal power and coal mine projects are further put into operation in the future, the dividend amount is expected to be even more impressive as the scale of profits increases.
Investment advice:
We expect the company's revenue for 2024-2026 to be 22.815 billion yuan, 25.544 billion yuan, and 27.992 billion yuan respectively, with growth rates of 17.3%, 12.0% and 9.6% respectively, and net profit of 3.104 billion yuan, 3.467 billion yuan, and 4,066 billion yuan respectively, with growth rates of 21.5%, 11.7%, and 17.3% respectively, maintaining a buy-A investment rating of 17xPE, and a six-month target price of 14.11 yuan.
Risk warning:
The risk of macroeconomic cycle fluctuations, coal price fluctuations, production safety risks, environmental risks, thermal power and coal mine project construction progress falling short of expectations, prediction assumptions and model errors exceeding expectations, dividend ratios falling short of expectations, risk of declining coal and electricity usage hours, etc.