The company is the core electricity listing platform for the Datang Group, and the value is expected to be revalued under state-owned enterprise reform and power system reform. The controlling shareholder of the company is Datang Group, which owns a total of 53.09% of the company's shares. By the end of 2023, the company held 73.29 million kilowatts of installed capacity, including 4562, 663, 7.46, 4.37, and 9.2 million kilowatts of coal power, gas power, wind power, photovoltaics, and hydropower respectively. Among the Group's four electricity listing platforms, the company ranked first in terms of installed capacity and asset scale, and the Group promised that the company would be the ultimate integration platform for the Group's thermal power business. At the end of 2023, the company elected a new chairman. Currently, Datang Power Generation's assets account for more than 60% of the Group's listed assets, while the market value only accounts for about 40%. Under the new round of central enterprise reform, it may face greater assessment pressure.

The company's thermal power plants are mainly from the North. Thermal power performance is mainly affected by coal prices and equity structure in Kengkou in the North; in the first quarter of 2024, it achieved a net profit of 1.33 billion yuan to the mother, reaching a record high. We believe that although the short-term performance of coal power units is still affected by coal prices, under the trend of power system reform, the coal power positioning is gradually adjusted to peak-shifting power sources. With the support of policies such as capacity electricity prices, the performance stability of coal power companies is expected to improve, and valuations are expected to be reshaped.

The new energy plan added 30 GW, which is currently the company's core profit sector. Under the dual carbon strategy, Datang Group proposed to install more than 50% of non-fossil energy by 2025, and the company will assume the main responsibility for additional installations. According to the Shanghai Stock Exchange Roadshow, the company plans to add more than 30 GW of new energy installed during the 14th Five-Year Plan period and achieve 19% of the 14th Five-Year Plan target in the three years from 2021 to 2023. According to the company's disclosure of the total profit of renewable energy sources, the profit from new energy sources rose steadily from 2021 to 2023. In 2023, it has already exceeded 3 billion yuan, making it the largest source of profit contribution.

Holding 9GW Hydropower and participating in Ningde Nuclear Power, contributing to stable performance and cash flow. The company holds 9.2 GW of hydropower assets, concentrated in Sichuan, Yunnan and Chongqing. The company's hydropower sector contributed about 1.4 billion yuan in total profit in 2023.

In the short term, according to the National Climate Center, the three southwest regions have more water intake this year than last year, and hydropower performance is expected to improve; in the medium to long term, the market-based electricity combined with the lack of electricity in the southwest region, hydropower disposal and electricity prices are expected to continue to improve; we emphasize the cash flow value of hydropower assets, and the value of hydropower is expected to be re-evaluated. The company participated in 44% of Ningde Nuclear Power's shares and received an investment income of about 1.3 billion yuan in 2023.

Profit forecast and valuation: The company's net profit for 2024-2026 is estimated to be 4.3, 5.2, and 6.1 billion yuan (including interest on perpetual bonds), respectively. After deducting interest on perpetual bonds of about 1.3 billion yuan, the current stock price corresponding to 24-26 PE is 18, 14, and 11 times, respectively (after deducting interest on perpetual bonds). Under the segmental valuation method, we estimate that the company's intrinsic value is 273 (thermal power) +207 (hydropower) +390 (new energy) -300 (other sectors, headquarters expenses and interest on perpetual bonds) = 57 billion yuan. The company's articles of association promise that the cash dividend ratio shall not be less than 50% of the parent company's net profit. In 2017-2020, the cash dividend ratio accounts for 55%-150% of the net profit attributable to the mother. Assuming that the company's 2024 cash dividend accounts for 50% of net profit to mother, the corresponding dividend rate is 3.9%. Covered for the first time, the company was given an “gain” rating.

Risk warning: The rise in coal prices exceeded expectations, the depreciation exceeded expectations, and the installed capacity of new energy fell short of expectations.