The Zhitong Finance App learned that Tianfeng Securities released a research report saying that it is optimistic that thermal power business will improve in 24 years. In terms of electricity prices, coal and electricity will be adjusted to two electricity prices, and the fixed cost ratio of capacity electricity prices will gradually increase. Recently, the 2024 annual electricity transaction prices in various provinces are expected to maintain a high upward ratio; in terms of electricity, according to the China Telecommunication Union, taking into account the growth in electricity consumption demand and the commissioning of power supplies, etc., the overall electricity supply and demand situation in the country is expected to be tight in 2024. The utilization hours of coal and electricity in many provinces are expected to be at a high level in recent years. On the cost side, coal prices are expected to remain low in 2024. Overall, the profitability of thermal power will continue to improve further in 2024. Specifically, due to the impact of the coal price base, etc., the degree of improvement in performance in the first half of the year may be more significant than in the second half of the year. Along with the improvement in the profitability of thermal power, the dividend level of each company may increase, thereby increasing the attractiveness of thermal power in terms of dividends.

In terms of specific targets, national companies suggest focusing on Guodian Electric Power (600795.SH), Huadian International (600027.SH), Huaneng International (600011.SH), and Huarun Electric Power (00836), while regional companies suggest focusing on Zhejiang Electric Power () and Anhui Energy (000543.SZ). 600023.SH

Tianfeng Securities's views are as follows:

Overview: Most companies' profits improved dramatically in '23, and Q4 alone was mostly the quarter with the lowest annual performance

Looking at the whole year, there was a year-on-year decline in China's coal price center. In 2023, the average liquidation price of coal (5,500K) in Qinhuangdao Port was 965 yuan/ton, down 305 yuan/ton from the previous year. Combined, electricity prices in many provinces continued to rise at a high rate, and the profitability of the thermal power business quickly recovered. Companies such as Huaneng International, Zhejiang Electric Power, and Guangdong Electric Power turned losses into profits year over year. Looking at a single quarter, many thermal power companies achieved quarter-on-quarter improvements in the first three quarters. However, Q4 alone (the annual results forecast center deducts the results for the first three quarters) was mostly the quarter with the lowest annual performance; on a year-on-year basis, most companies' performance improved or their losses narrowed; on a month-on-month basis, the performance of only individual companies such as Shenneng Co., Ltd. improved.

Single Q4 analysis: The operating level weakened month-on-month, and expenses and impairment may also have an impact

① Electricity consumption: In 2023Q4, China's thermal power utilization hours are basically at the average level in recent years. Judging from the year-on-year trend in electricity volumes of various companies, Huaneng International Coal and Electricity, Guodian Electric Power, etc. increased year-on-year in 23Q4, while Huadian International Coal and Power Co., Ltd.'s coal power declined slightly. On a month-on-month basis, electricity production of all companies declined. Among them, Zhejiang Electric Power, Guodian Electric Power, and Shenneng shares declined relatively low.

② Coal price: If one month's inventory is taken into account, the liquidation price of last coal (5,500K) in Qinhuangdao Port in the fourth quarter of 2023 was 954 yuan/ton, down 519 yuan/ton year on year, up 129 yuan/ton from month to month. Assuming that the proportion of Changxie coal is 50% and that the coal consumption for electricity is 300 g/kwh, the fuel cost per unit of electricity supply will increase by 0.022 yuan/kilowatt-hour compared to the previous month.

③ Expense side: The management expenses of some companies for the third quarter and fourth quarter of the single year were taken. With the exception of Baosheng Energy, the management expenses of other companies in the fourth quarter all increased significantly compared to the third quarter. Judging from the ratio of the month-on-month increase in the average management expenses in the fourth quarter of 2020-2022, Datang Power Generation, Anhui Electric Power, and Guodian Electric Power were all high.

④ Impairment: Asset depreciation was mostly concentrated in the fourth quarter, and 2023Q4 may also have an impact.

Risk warning: the risk of a sharp macroeconomic decline, policy progress falling short of expectations, the risk of electricity prices falling short of expectations, the risk of a sharp rise in coal prices, etc.