\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 995 Yunnan Wenshan Electric Power Co.Ltd(600995) )
Both volume and price rise, revenue increases, and non recurring factors affect profitability. The total revenue of Yunnan Wenshan Electric Power Co.Ltd(600995) business in 2021 was 2.163 billion yuan, an increase of 15% over the previous year. The high increase in revenue was mainly due to the rise in electricity sales and the rebound in electricity sales prices. The net profit attributable to the parent company was 16 million yuan (- 85.77%), and the decline in profit was mainly affected by non recurring profits and losses and accelerated depreciation of assets based on tax standards. However, as the above factors are non recurring factors, the overall profitability of the company still tends to develop smoothly.
Major asset restructuring and integration have been steadily promoted and entered the energy storage advantage competition. On September 27, 2021, the company announced a major asset restructuring plan, which plans to replace the relevant assets and liabilities originally mainly engaged in power purchase and sale, power design and power distribution business with 100% equity of the target peak shaving and frequency modulation power generation Co., Ltd. held by the indirect controlling shareholder China Southern power grid. Peak shaving and frequency modulation company is a wholly-owned subsidiary of China Southern Power Grid, mainly engaged in pumped storage, peak shaving hydropower, independent energy storage at the grid side and gas power business. But before the transaction is completed, the company will divest its partnership share of the 2.9762% of the green energy hybrid fund, which is related to the assets and liabilities of the gas and electricity business. After the completion of this major asset restructuring, the company will transform into the development, investment, construction and operation of pumped storage, peak shaving hydropower and grid side independent energy storage business, all of which belong to the advantage of energy storage.
The core business has entered the high growth channel, and the reform of electricity price mechanism is expected to open the profit ceiling. The opinions of the company on promoting the transformation of green and low-carbon development issued by China Southern Power Grid Corporation put forward that the construction of pumped storage will be accelerated in the next 15 years, with an additional installed capacity of 6 million kW in the 14th five year plan, 15 million kW in the 15th five year plan and 15 million kW in the 16th five year plan, an increase of 4.6 times in the next 15 years. According to the power grid development plan of China Southern Power Grid during the 14th Five Year Plan period, 20 million kilowatts of new energy supporting energy storage will be promoted during the 14th Five Year Plan period. Two part electricity price and marketization open the profit ceiling. On April 30, 2021, the national development and Reform Commission issued the opinions on further improving the price formation mechanism of pumped storage power stations (Document No. 633), which defined the price mechanism and is expected to open the profit ceiling.
Risk warning: asset restructuring is not as expected; The energy storage policy is less than expected; The electricity price mechanism is not as expected.
Investment suggestion: for the first time, give a “buy” rating.
We estimate that the net profit attributable to the parent company from 2022 to 2023 will be RMB 1.01 billion, RMB 2.21 billion and RMB 2.36 billion respectively, with a year-on-year increase of 18%, 199% and 7% respectively. After the asset injection, the company issued 1.533-1.993 billion additional shares, and the total share capital increased from 479 million shares to 2.012-2.472 billion shares, corresponding to the total market value of the current stock price of about 29-35.6 billion yuan. Therefore, the corresponding PE valuation in 2023 is 13-16 times. We give the company 18 times PE in 2023, the target market value is 39.8 billion yuan, and the corresponding target share price is 16.10-19.78 yuan, which is 12% – 37% higher than the current premium space. We give the “buy” rating for the first time.
