HEGC(SZ:000883) Guoxin Securities·2024-04-29 14:00Investment Rating - The investment rating for Hubei Energy (000883.SZ) is "Buy" [1][4]. Core Views - In 2023, the company experienced a decline in revenue but a significant increase in net profit, achieving revenue of 18.669 billion yuan (-9.28%) and a net profit of 1.749 billion yuan (+50.41%) [1][5]. - The substantial growth in net profit is attributed to a decrease in fuel costs for thermal power generation, which improved profitability [1][5]. - For Q1 2024, the company reported a significant increase in both revenue and net profit, with revenue reaching 5.206 billion yuan (+27.19%) and net profit at 780 million yuan (+150.98%) [1][5]. - The favorable water conditions are expected to continue improving the profitability of the hydropower business [1][12]. - The company is actively advancing its renewable energy projects, which are anticipated to contribute to incremental performance growth [1][12]. Summary by Relevant Sections Financial Performance - In 2023, Hubei Energy's revenue decreased to 18.669 billion yuan, while net profit increased to 1.749 billion yuan, reflecting a 50.41% year-on-year growth [2][5]. - The first quarter of 2024 saw a revenue increase to 5.206 billion yuan and a net profit of 780 million yuan, marking a 150.98% increase compared to the same period last year [1][5]. Hydropower and Renewable Energy - The hydropower business is expected to see sustained profitability improvements due to favorable water conditions in 2024 [1][12]. - The company has ongoing hydropower projects with a planned installed capacity of 4.4 million kilowatts and approved projects of 1.8 million kilowatts [1][12]. - As of the end of 2023, the total installed capacity for renewable energy reached 4.3845 million kilowatts, with ongoing projects expected to drive further growth [1][12]. Profitability Metrics - The company's gross margin improved to 20.08% in 2023, and net margin increased to 10.07% [9][11]. - For Q1 2024, the gross margin rose to 28.41%, and net margin improved to 18.39% [9][11]. Earnings Forecast - The forecast for net profit from 2024 to 2026 is 2.795 billion yuan, 3.155 billion yuan, and 3.559 billion yuan, respectively, with year-on-year growth rates of 59.9%, 12.9%, and 12.8% [1][12]. - The expected earnings per share (EPS) for the same period are 0.43 yuan, 0.48 yuan, and 0.55 yuan [1][12]. Valuation - The reasonable valuation for the stock is estimated to be between 6.00 and 6.43 yuan per share, indicating a premium of 6-14% over the current stock price [1][12].