\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 025 Huaneng Lancang River Hydropower Inc(600025) )
Event:
The company released its annual report for 2021, and achieved an annual operating revenue of 20.2 billion yuan, a year-on-year increase of 4.93%; The net profit attributable to the parent company was 5.84 billion yuan (excluding 5.63 billion yuan), a year-on-year increase of 20.75% (excluding 17.74%). On the same day, the company released the first quarterly report of 2022. In the first quarter, the operating revenue was 3.94 billion yuan, a year-on-year increase of 2.72%; The net profit attributable to the parent company was 742 million yuan (less 741 million yuan), a year-on-year increase of 23.40% (less 23.03%).
The increase of electricity price and the decrease of financial expenses have driven the rapid growth of net profit attributable to the parent company
The on grid power in 2021 was 93.707 billion kwh, a year-on-year decrease of 3.25%, mainly due to the dry water from Lancang River in 2021, and the company controlled the “two reservoir” water levels of Xiaowan and Nuozhadu power stations in order to ensure the reliable power supply in the winter of 2021 and the spring of 2022; In 2021, the company’s comprehensive settlement electricity price was 0.241 yuan / kWh (including tax), an increase of 0.018 yuan / kWh year-on-year, mainly due to the increase of market-oriented transaction electricity price in Yunnan and the weight of market-oriented transaction electricity in the company’s power generation exceeded 65%; In 2021, the company strictly controlled the scale of interest bearing liabilities, continued to optimize the debt structure, and reduced the financing cost by replacing the stock of interest bearing liabilities with low interest rate funds in advance. The annual financial cost was 3.375 billion yuan, a year-on-year decrease of 12.7%.
According to the previously released announcement on the completion of power generation in the first quarter of 2022, the on grid power in the first quarter was 17.488 billion kwh, with a year-on-year increase of 1.61%, mainly due to the year-on-year increase of hydropower cascade energy storage in the beginning of 2022 and the year-on-year increase of power transmission from West to east; The financial expenses in the first quarter were 812 million yuan, a year-on-year decrease of 7.6%.
The gross profit margin and ROE (weighted) increased, and the cost rate decreased by 2.7pct over the 21-year period
In 2021, the gross profit margin of the company’s sales was 54.63%, with a year-on-year increase of 1.46 percentage points, mainly due to the increase of average on grid electricity price; Roe (weighted) 9.29%, with a year-on-year increase of 0.82 percentage points; During the period, the expense rate was 19.42%, a year-on-year decrease of 2.69 percentage points, mainly due to the year-on-year decrease of 3.37 percentage points in the financial expense rate; The net operating cash flow was 16.494 billion yuan, a year-on-year increase of 12.8%.
The financial indicators in the first quarter of 2022 are still good. The gross profit margin of the company’s sales in the first quarter was 47.91%, with a year-on-year increase of 0.63 percentage points; Roe (weighted) 1.15%, with a year-on-year increase of 0.18 percentage points; During the period, the expense rate was 23.04%, a year-on-year decrease of 1.97 percentage points, of which the financial expense rate decreased by 2.29 percentage points year-on-year.
Yunnan’s transaction electricity price has increased significantly and is optimistic about the long-term upward space of electricity price
Since 2017, driven by the continuous expansion of energy consuming industries such as aluminum and silicon, the power supply and demand situation in Yunnan has improved year by year, and the problem of abandoning water and electricity has been gradually alleviated. In recent years, the pattern of power supply and demand in Yunnan has tightened, and the transaction price has increased significantly. In March 2022, the average transaction price of power plants in the province reached 026626 yuan / kWh, a year-on-year increase of 6.35% and an increase of 11.28% compared with March 2020. Previously, in November 2021, Yunnan Provincial Development and Reform Commission issued a document to cancel the province’s preferential electricity price policy for electrolytic aluminum industry. At present, it may have been extended to photovoltaic, lithium battery and other high energy consuming industries. With the cancellation of preferential electricity price, the improvement of power marketization, dual control of energy consumption and clean energy consumption to be implemented, it is optimistic about the long-term upward space of electricity price in Yunnan Province.
The development goal of new energy is clear, and 1.3gw will be put into operation in 2022
During the 14th Five Year Plan period, the company plans to build a “double ten million kilowatts” clean energy base in Yunnan and Tibet sections of the Lancang River. Since 2021, the company has actively carried out the development of “integration of scenery, water and storage”. In 2021, the company has completed the approval (filing) of 3.87gw of new energy and started the construction of 0.99gw. According to the announcement of new energy investment plan in 2022, it is planned to invest 5 billion yuan to develop new energy projects in 2022, 15 new projects are planned to be started, and 1.3gw of installed capacity is planned to be put into operation. Relying on its own advantages in hydropower resources, the company develops new energy, which is expected to open up new growth space.
Valuation analysis and rating description
It is expected that the electricity price in Yunnan will continue to rise during the 14th Five Year Plan period; The production of new energy is expected to accelerate and become a new performance growth point. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 6.647 billion, RMB 7.184 billion and RMB 7.635 billion respectively, and the corresponding PE will be 17.03 times, 15.76 times and 14.83 times respectively. For the first coverage, give a “recommended” rating.
Risk tips:
The incoming water is lower than expected; On grid tariff reduction; The progress of new energy development is less than expected.
