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Huaneng International (600011).
Huaneng International's January trend).
January Performance:**13.77%, * to 876 yuan.
At present, the reasons for recommending the company are as follows: first, the worst period of performance in the thermal power sector has passed, and the growth certainty of this year is strong; Second, the capacity electricity price will be implemented from this year, and Huaneng's performance is expected to increase the most; The third is a model of perennial dividends, with strong attributes of scarce assets, which is in line with the characteristics of this round of hype.
Reason for recommendation:
1. The future performance growth of the thermal power sector is highly certain.
Looking forward to 2024, the long-term agreement on electricity prices is basically confirmed, and most provinces except Guangdong will only reduce by 1%-5% year-on-year.
In terms of coal prices, considering that November to January 2024 is usually the peak season for thermal coal, but coal prices have fallen by 25% year-on-year, which is much greater than the ** range of the long-term agreement on electricity prices in 2024. Therefore, the performance of the thermal power sector in 2024 will further improve year-on-year, which is basically certain.
2. The capacity electricity price will be implemented this year, and Huaneng's performance is expected to increase the most.
In January, most areas clearly implemented the compensation standards for electricity prices, and a few regions supplemented the detailed rules in light of local conditions. The so-called capacity electricity price is to give corresponding subsidies according to the installed capacity of thermal power enterprises. In the past, thermal power enterprises could only recover their costs through a single electricity price, and the income was determined by the amount of electricity generated, but now the introduction of capacity electricity price is equivalent to changing the electricity price from the previous single to a two-part model, which will help thermal power enterprises recover the fixed cost of coal-fired power units and improve their performance. According to the agency's calculations, after the implementation of the capacity electricity price, Huaneng's performance increased the most.
In addition, capacity tariffs can also help increase the valuation of the thermal power industry.
3. There is no need to worry too much about the risk of impairment.
The asset provision of thermal power companies has always been one of the most worrying risks for the industry, and the main reason for the impairment is the profit pressure caused by overcapacity, obsolete production capacity and lower electricity prices.
However, in the middle and late stages of the "14th Five-Year Plan", especially after August 2022, the policy refocused on thermal power, encouraging a number of thermal power units to approve new investment, and at the same time, in 2023, the thermal coal ** hub will move significantly downward, and the profitability of thermal power will improve significantly. At present, the risk of accrual in the thermal power industry is gradually shrinking.
Looking at the thermal power companies that have announced their performance forecasts, Shenergy has a significant increase in performance forecasts, of which the net profit of 8-1 billion yuan in a single quarter in the fourth quarter is mainly due to the lower than expected asset impairment.
4. Perennial dividend model, strong scarce asset attributes.
The main character of this round of special valuation is "special", which is manifested in scarce assets, such as coal, PetroChina, etc. This is followed by high dividends and low valuations.
Huaneng is the largest central enterprise in thermal power, mastering the largest thermal power generation resources in China, and has strong monopoly attributes. Moreover, the company's articles of association stipulate that when the accumulated undistributed profit is positive, the annual dividend shall not be less than 50% of the profit of the year. From 2001 to 2020, the company has paid dividends for 20 consecutive years, reaching more than 7 points when the dividend yield is high and more than 1 point when it is low, with a cumulative dividend of 60.5 billion.
In 2021 and 2022, due to historic losses, it failed to pay dividends for two consecutive years. However, according to the latest forecast, a significant turnaround has been determined in 2023, and at 50%, the annual dividend is expected to be at least 4 billion yuan, corresponding to the current market value of about 4 points. What's more, the performance in 2024 may be even better with the support of capacity electricity prices, and the dividend yield is expected to rise further.
Wanhe Electric (002543).
January Performance:**5.72%, but the share price hit its highest point since April 2023 in the middle of the month at 953 yuan, and finally closed at 841 yuan.
Wanhe Electric's January trend).
Reason for recommendation:
1. Financially stable, good dividends, friendly to small and medium-sized shareholders.
The company's gas water heater has been the first in the comprehensive market share industry for 18 consecutive years, the company's total market value is 6.2 billion yuan, the company has never refinanced after listing in 2011 after raising 1.5 billion yuan, and has paid dividends 15 times since its listing, with a cumulative dividend amount of 257 billion yuan, which is a listed company that is quite friendly to small and medium-sized shareholders.
The company is financially sound, with monetary funds as of the end of the third quarter of 2023 reaching 28800 million yuan, long-term and short-term interest-bearing loans are less than 700 million yuan, so the company's financial expenses in the first three quarters are negative 50 million yuan. In addition, the company's other financial assets are as high as 1.5 billion, mainly the investment in Qianhai Equity Investment, which is managed by Jin Haitao, the former chairman of Shenzhen Venture Capital, with a scale of more than 20 billion. The company's operating cash flow in the first three quarters was 1.2 billion, far exceeding the net profit of 5600 million. It can be seen that the company's operating and financial foundation is very stable.
3. The average buyback** is comparable to the current stock price.
The company has just completed the implementation of the repurchase plan, and as of January 25, 2024, the actual time range for the implementation of the repurchase is from November 7, 2023 to January 25, 2024. The cumulative number of shares repurchased by the company is 7,205,259 shares, and the total amount paid is 59,956,78380 yuan, the average repurchase **833 yuan, which is equivalent to the current stock price, and the total repurchase amount is the upper limit of the range of 30 million to 60 million yuan promised to be repurchased.
3. The current stock price is relative to the average holding cost of the market, the length of the stock price is near the annual line, and the direction is selected from a technical point of view, the company's current stock price is in the position of the annual line, indicating that the average holding cost of the market is nearby, and the long and short term are nearby, indicating that the market is in the position of the direction to be chosen, considering the company's stable operation and excellent financial condition, the current dividend yield is around 5%, and the probability of breaking through is higher.
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