On the evening of April 21, Shenzhen Energy Group Co.Ltd(000027) ( Shenzhen Energy Group Co.Ltd(000027) , SZ) released the financial report for 2021. During the reporting period, the company achieved a revenue of 31.57 billion yuan, a year-on-year increase of 54.34%, and a net profit (that is, the net profit attributable to the shareholders of the listed company, the same below) of 2.129 billion yuan, a year-on-year decrease of 46.57%.
It is understood that the reason why the company’s revenue and net profit showed the opposite trend last year is mainly because the “base” of the company’s net profit in 2020 is too high: in that year, the company confirmed a “demolition compensation” of 1.951 billion yuan, which was included in the current non operating profit and loss.
Despite the above effects, deducting non net profit can better reflect the actual operation of Shenzhen Energy Group Co.Ltd(000027) . In 2021, the company achieved a net profit of RMB 1.84 billion, a year-on-year decrease of 2.7%. Behind the “increasing income without increasing profit” is the high operating costs caused by the rise in fuel prices in 2021.
It is worth mentioning that many thermal power enterprises have suffered losses due to the rise of coal prices in 2021 How does Shenzhen Energy Group Co.Ltd(000027) deal with the pressure of high fuel prices?
The fluctuation of net profit is affected by “demolition compensation”
From 2019 to 2021, Shenzhen Energy Group Co.Ltd(000027) ‘s net profit was like riding a “roller coaster”, which increased from 1.701 billion yuan to 3.984 billion yuan, an increase of more than 134%, and then fell back to 2.129 billion yuan.
However, the fluctuation of net profit is not too much related to Shenzhen Energy Group Co.Ltd(000027) its own operating conditions, which is mainly affected by a demolition compensation confirmed by the company in 2020.
In the second half of 2019, Shenzhen Energy Group Co.Ltd(000027) signed relevant agreements with Shenzhen Vanke Development Co., Ltd. and Shenzhen Vanke Nancheng Real Estate Co., Ltd. (hereinafter referred to as Vanke Nancheng), agreeing that the demolition compensation of Nanshan District energy industrial community (hereinafter referred to as “Nanyou industrial community”) is 1.96 billion yuan.
As of April 3, 2020, Vanke Nancheng has paid all compensation. Since the book value of Shenzhen Energy Group Co.Ltd(000027) carried forward to Nanyou industrial community and the expenses related to demolition amount to 9.3228 million yuan, this demolition compensation activity has brought Shenzhen Energy Group Co.Ltd(000027) non operating income of nearly 1.951 billion yuan.
The above amounts were included in the non operating profit and loss of Shenzhen Energy Group Co.Ltd(000027) 2020, which contributed to the company’s net profit of 3.984 billion yuan in that year, with a year-on-year increase of 134.19%.
Ignoring the impact of demolition compensation, the net profit deducted by the company from 2019 to 2021 was 1.428 billion yuan, 1.891 billion yuan and 1.84 billion yuan respectively, which was relatively stable.
How to deal with the price pressure of raw materials?
Shenzhen Energy Group Co.Ltd(000027) is mainly engaged in the development, production, purchase and sale of various conventional and new energy sources, as well as urban solid waste treatment, wastewater treatment and urban gas supply.
In 2021, the company’s power sector achieved a revenue of 19.938 billion yuan, accounting for 63.15% of the total revenue. Among them, the revenue of coal-fired products was 9.542 billion yuan, accounting for 30.23% of the total revenue.
In 2021, the company deducted non net profit of about 1.84 billion yuan, a year-on-year decrease of 2.7%. It is understood that the decline in non net profit of Shenzhen Energy Group Co.Ltd(000027) deduction is mainly affected by the sharp increase in fuel costs. In 2021, the company’s fuel cost reached 12.515 billion yuan, a year-on-year increase of 102.9%, accounting for 49.22% of the operating cost from 42.37% in the same period in 2020.
The sharp rise in fuel costs is due to the sharp rise in the prices of coal and other products last year. On the afternoon of April 22, the staff of Shenzhen Energy Group Co.Ltd(000027) Securities Department said in a telephone interview with the reporter of daily economic news that if it was a power company dominated by thermal power last year, many of them had suffered losses.
It is understood that China Resources Power (00836, HK), Huaneng Power International Inc(600011) ( Huaneng Power International Inc(600011) , SH), Datang International Power Generation Co.Ltd(601991) ( Datang International Power Generation Co.Ltd(601991) , SH), China Power (02380, HK) and other companies all experienced negative growth in net profit in 2021, among which Huaneng Power International Inc(600011) , Datang International Power Generation Co.Ltd(601991) , China power also suffered losses.
In this context, Shenzhen Energy Group Co.Ltd(000027) how to face the impact of raw material price rise?
Shenzhen Energy Group Co.Ltd(000027) in response to investors’ questions on panorama.com in March this year, the company said that under the market situation of high fluctuation of fuel price, escalation of pressure on power supply and gas supply, the company made full use of the diversified layout advantages of “four core and two drive” to maintain the relative stability of its main business performance. The continuous operation of new energy projects and solid waste treatment projects, the vertical extension of environmental sanitation business, the continuous expansion of gas business scale and the stable operation of overseas projects have made up for the gap of declining business performance of coal-fired power generation sector.
It is understood that Shenzhen Energy Group Co.Ltd(000027) ‘s “four core and two drive” strategy refers to taking “clean power, ecological and environmental protection, comprehensive gas and energy international” as the core and “energy technology and financial capital” as the driving force.
From the perspective of ecological and environmental protection, in 2021, Shenzhen Energy Group Co.Ltd(000027) the environmental protection business achieved a revenue of 6.393 billion yuan, a year-on-year increase of 105.53%, accounting for 20.25% of the total revenue from 15.21% in the same period in 2020.
From the perspective of clean power, in 2021 Shenzhen Energy Group Co.Ltd(000027) of hydropower, wind power and photovoltaic products achieved a total revenue of 4.386 billion yuan, accounting for about 13.9% of the total revenue. Among them, the revenue of wind power was 2.398 billion yuan, a year-on-year increase of 146.49%.
Why did the revenue of wind power business grow rapidly last year? Does it prove that Shenzhen Energy Group Co.Ltd(000027) has a “focus” on the development of clean power? In this regard, the staff of the company’s Securities Department said that wind power (growth) was due to the fact that some units of the previous year achieved capacity release last year, so it had a great increase in output in this year (2021), not that there were too many new units put into operation.
So how long will the pressure of increased fuel costs last this year?
According to a research report by Chuancai securities at the end of March this year, with the introduction of the stable price and supply guarantee policy of the national development and Reform Commission, the coal price has been effectively controlled. In February, the national development and Reform Commission issued the notice on further improving the coal market price formation mechanism (hereinafter referred to as the notice). The notice defined the reasonable range of coal price. The medium and long-term transaction price of 5500kcal of underground coal in Qinhuangdao port is 570 ~ 770 yuan per ton. In addition, the national development and Reform Commission has also held several meetings to emphasize the problem of ensuring the supply of coal and guide the price to return to a reasonable range. The profit recovery expectation of thermal power enterprises is expected to be further enhanced.
