\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 011 Huaneng Power International Inc(600011) )
Key investment points
Event: the company released its annual report for 2021, realizing a revenue of 204605 billion yuan, a year-on-year increase of 20.75%; The net profit attributable to the parent company was -10.264 billion yuan, a year-on-year increase of – 324.85%; After deduction, it was -12.558 billion yuan, a year-on-year increase of – 385.57%.
The performance is in line with market expectations, and the high coal price has seriously dragged down the performance of the company. According to the company’s announcement, the revenue in 2021 was 204605 billion yuan, an increase of 20.75% year-on-year. Affected by the sharp rise in coal purchase price year-on-year, the net profit attributable to the parent company was -10.264 billion yuan, a decrease of 324.85% year-on-year, which was consistent with the range of the company’s previous performance pre loss announcement. According to the contents of the annual report interpretation meeting published by the company, the performance in 2021 is divided into sectors: the net profits of coal power, gas power, wind power, photovoltaic, hydropower and biomass are – 176, 11, 44, 7, 20 and – 20 million yuan respectively, of which the net profits of each section of Q4 are – 140, 2, 13, – 20 and 20 million yuan respectively. It can be seen that most of the performance losses are reflected in Q4.
Looking forward to the high coal price falling in 2022, 8GW green power will contribute significant performance increment. Since Q4 of 2021, the state has released 500 million tons of advanced coal production capacity, and another 300 million tons will be released this year; From the monthly data, the coal output increased by more than 10% year-on-year in January and February, and the average daily dispatching volume has remained at the level of more than 12 million tons since March. According to the company’s public communication, more than 8GW of green power capacity is planned to be put into operation in 2022, including 3gw of wind power (1.35gw of offshore wind power) and 5GW of photovoltaic power, which is expected to contribute significant performance increment.
Green power business: high industry prosperity + good competition pattern + strong profitability, with a target market value of 180 billion. 1) Industry level: high prosperity + good competition pattern + strong profitability. Green power operation belongs to a very clear growth stage in the next 5-10 years, which is more suitable for PEG valuation. 2) At the company level, combined with the group’s objectives and on-hand reserve projects, we expect the compound growth rate of the company’s green power installed capacity to be 40% from 2022 to 2024; Considering that there are some sea breeze projects in the company’s new installed capacity, and their profitability is stronger than that of land breeze projects, the compound growth rate of the company’s net profit attributable to the parent company should be higher than that of the installed capacity. According to the calculation of 30 times PE given by PEG, the contribution of the new energy installed business to the net profit attributable to the parent company in 2022 is about 6 billion yuan, and the corresponding target market value is 180 billion yuan.
Thermal power business: in the long run, it will eventually be converted into green power assets through depreciation, and the current value is significantly underestimated.
1) in the short term, with the market-oriented transaction price rising and the national development and Reform Commission strictly controlling the coal price, the company’s thermal power business has passed the most difficult moment and is expected to achieve breakeven or micro profit. 2) In the medium term, with the introduction of the administrative measures for power auxiliary services, the profitability of auxiliary services of thermal power units is expected to be improved. 3) In the long run, the company’s existing thermal power assets will eventually be converted into green power assets in the form of depreciation. At present, the Pb of Huaneng Power International Inc(600011) (a share) and Huaneng Power International Inc(600011) power (H share) are 2.10 and 0.39 respectively, while the Pb of Longyuan Power (a share) and Longyuan Power (H share) are 4.01 and 2.06 respectively. Therefore, the value of the company’s existing thermal power assets is obviously underestimated.
Valuation and profit forecast: combined with the contents of the annual report, we raised the company’s EPS from 2022 to 2024 to 0.48, 0.73 and 0.85 yuan, and the PE was 16, 10 and 9 times respectively, maintaining the “buy” rating.
Risk tip: the hours of wind power photovoltaic power generation do not meet expectations, and the terminal sales price continues to decline under the influence of policies.
