In the era of low interest rates, "cash cows" are true love.
Typical characteristics of "dairy cows": strong cash flow + high proportion of dividends!
Such companies have the characteristics of large upfront capital expenditure, long profit cycle and stable cash flow. This is the case with power companies, once the inflection point of large capital expenditures is passed, the proportion of financial expenses in revenue begins to decline, and the company's profits naturally begin to be released.
There are nearly 20 such listed companies in China, most of which have a small market capitalization, with high debt, poor profitability and low dividends.
The fundamentals of the leading companies in the market value of state-owned central enterprises are solid and stable, with strong profitability and relatively stable dividends, among which the Yangtze River Power, Huaneng Hydropower, SDIC Power, and Guiguan Power are more prominent, and the dividend yield level of China Nuclear Power and China General Nuclear Power in the direction of nuclear power also has the potential to catch up with and surpass hydropower companies.
Today, let's compare and take a look at the value of Yangtze River Power, the "first brother" of A-share power.
Three highlights of Yangtze Power
First, the comprehensive strength is the strongest, Yangtze River Electric Power occupies the advantageous waters of the Yangtze River, with six large hydropower stations of Wudongde, Baihetan, Xiluodu, Xiangjiaba, Three Gorges and Gezhouba, and the hydropower unit is 717950,000 kilowatts, accounting for 19 of the country's hydropower capacity5%, which is also the first in the world.
It is worth mentioning that China's hydropower development process has entered the middle and late stages, and high-quality large-scale hydropower such as Yangtze River power has a strong scarcity.
Since the power generation of hydropower mainly depends on the flow of water, and these factors are affected by the natural conditions of the basin such as precipitation, topography, and hydrology. At present, China's hydropower remaining developable resources are limited, and among the hydropower stations under construction in large hydropower bases, the increase in hydropower stations with an installed capacity of more than 5 million kilowatts is almost zero, and the scarcity of high-quality large hydropower assets is highlighted.
Second, the appeal of weight cannot be ignoredYangtze River Power holds shares in a number of hydropower companies, each holding 108%, 104%, SDIC Power 149% equity, that is to say, owning Yangtze River Power is equivalent to the entire hydropower industry.
Third,High dividends, high dividends, typical cash cowsIn 2022, Yangtze Power's dividend yield was nearly 4%, and the dividend yield has been stable at 3 for three years6% or more. Since its listing in 2002, Yangtze Power has paid dividends for 20 consecutive years, with a cumulative dividend amount of 86 yuan, and its listing price is only 43 yuan, the accumulated dividend has been doubled back to the first batch of shareholders.
The point is,Yangtze Power's dividend payout ratio (dividend net profit) in 2022 is 94%.Almost all the profits were used to distribute dividends to shareholders that year, which is unique and unique in A-shares!
So, can Yangtze Power's high dividends be sustained?
The confidence of the first brother of power to continue to pay large dividends lies in the good cash flow brought by high returns.
In order to give shareholders confidence, Yangtze Power promises a dividend payout ratio of no less than 70% by 2025, and according to the latest performance forecast, the company will achieve a net profit of 27.4 billion yuan in 2023, of which the net profit in the fourth quarter of 2023 will be 58600 million,A year-on-year increase of 919%It is estimated that this year's dividend will exceed 20 billion.
The high performance growth comes from the injection of Wudongde and Baihetan power stations.
In 2023, the injection of Wudongde and Baihetan hydropower stations will bring 10.2 million kilowatts and 16 million kilowatts of new installed capacity to the company, respectively, and a total of 26.2 million kilowatts of new capacityIt is equivalent to the power generation capacity of the two new power stations of "Three Gorges + Gezhouba".
No, the company's full-year power generation in 2023 increased to 276 billion kilowatts, a year-on-year increase of nearly 50%.
Moreover, with the promotion of market-oriented electricity price trading, hydropower prices are expected to gradually increase.
At this stage, the electricity price of Baihetan has been completely marketized, and the high price of electricity transmission has been clear, which is unrivaled by other power stocks, and the company's high electricity price will account for more than 50% in the future, which will bring a steady stream of stamina for performance improvement.
Next, let's look at how profitability is reflected in gross and net profit margins.
From 2018 to 2022, the gross profit margin and net profit margin of Yangtze Power have always remained above 60% and 40%, although the company's two data have declined in 2022, but it is mainly due to the reduction of short-term power generation due to the impact of water storage, and the gross profit margin will return to more than 60% this year.
Compared with Kweichow Moutai, the A-share value leader, with a gross profit margin of 91%, it contributes 53% of the net profit margin, on the other hand, the 60% gross profit margin of Yangtze River Power can contribute 45% of the net profit margin, which is also an excellent performance.
The finance rate is decreasing year by year
In 2010, the financial rate was as high as 20%, and then it has been decreasing, and by 2018-2022, the company's financial expense ratio has increased from 114% gradually decreased to 79%, which stabilizes the company's net profit margin to a certain extent, and under the high gross profit level, the company has become a proper printing machine.
Considering the gradual repayment of principal and interest, the replacement of high-interest debts, and the optimization of the debt structure, it is expected that the company's financial expense ratio will continue to decline.
Cash flow: the net cash ratio far exceeds that of Moutai
The "net present ratio" is the core indicator to measure the "true" profitability of a company. It reflects the most "real" profitability of the enterprise, and the larger the net cash ratio, the higher the quality of the company's profitability.
Net Present Ratio Net cash flow from operating activities Net profit.
The net present ratio is above 70%, the net present ratio of 1 is excellent, and the net present ratio is more than 1 all year round is very good.
Kweichow Moutai's "net present ratio" has been maintained at more than 1 times, because of the fact that the pre-receivables are included in the cash flow.
Let's compare and look at the performance of Yangtze Power, from 2013 to 2022, the net present ratio of Yangtze Power has always remained at 1More than 3, far more than Moutai.
The abundant cash flow not only ensures the stable development of the company, but also ensures that the company can maintain a high dividend ratio, which is the main reason why the dividend yield of Yangtze Power is better than that of Moutai.
"High yield + high willingness + high dividend" brings high valuation expectations
Globally, the leading hydropower companies are mainly located in China, Brazil, Canada and other places, and we select Brazil Power as the largest power company, and Europe's largest hydropower company Verbund to compare the valuation with Yangtze Power.
At present, the total market value of Yangtze Power exceeds 630 billion, which is the absolute first in the world; The current company P/E ratio is 221 times, which belongs to the global average, but in view of the scarce hydropower assets of Yangtze Power in China, especially high-dividend stocks are still the core value of the market at this stage, it is acceptable to have a certain high valuation premium in the future.
Let's look at absolute valuations
We base our base on the main assumptions (risk-free rate 2.).5%, *Risk premium 65%, BERA value 07. The total debt is 320 billion, and the sustainable growth rate is 20%, etc.), using the FCFF (Future Free Cash Flow) valuation method, the company's fair value is 275 yuan shares, our calculation of ** is for reference only.
To sum up, Yangtze Power is a "rent collection stock" after a huge investment, and this "rent" is basically stable, which is extremely scarce in the domestic capital market.
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