Matters:

The company released its semi-annual report for 2022, achieving operating income of 2,280 million yuan, a year-on-year increase of 36.27%, net profit of 176 million yuan, a year-on-year decrease of 14.52%, net profit after deducting 168 million yuan, a year-on-year decrease of 15.93%, and EPS of 0.32 yuan. In the second quarter, the company achieved revenue of 1,346 million yuan, an increase of 25.72% over the previous year, and net profit for the return of 114 million yuan, a year-on-year decrease of 11.9%.

Peace view:

The scale of revenue is growing rapidly, and the revenue growth rate far exceeds the industry average. In the first half of the year, the company achieved revenue of 2,280 million yuan, an increase of 36.27% over the previous year, wind power towers accounted for 98% of revenue, and its domestic business revenue in China was 1,593 billion yuan, an increase of 29.7% over the previous year, and export business revenue of 687 million yuan, an increase of 54.4% over the previous year. Domestic and foreign wind power demand was weak in the first half of the year, and the company's wind power tower revenue growth rate far exceeded the industry average, reflecting the rapid increase in the company's market share. By the end of the second quarter, the company's inventory size was 1.33 billion yuan, a decrease of 7.2 billion yuan from the beginning of the year. Inventory delivery and revenue recognition may have a positive impact on revenue growth in the first half of the year. Furthermore, the anti-dumping duty rate levied on the company's wind power tower exports to the EU is relatively low, helping the company's export business grow rapidly.

Low profit levels in the export business are dragging down the company's performance. While the scale of revenue grew rapidly, the company's net profit declined to a certain extent in the first half of the year, mainly due to a sharp drop in gross margin. In the first half of the year, the company's comprehensive gross profit margin was 12.64%, a year-on-year decrease of 9.69 percentage points, a year-on-year decrease of 9.69 percentage points, a year-on-year decrease of 9.32 percentage points, and the export business gross profit margin was 6.53%, a year-on-year decrease of 9.55 percentage points. In the first half of the year, Penglai Daikin, the main operator of export business, achieved net profit of 84 million yuan, a year-on-year decrease of 66 million yuan, which dragged down the company's performance.

The Guangdong base is about to be put into operation, and the “two seas” strategy is advancing rapidly. In terms of Horaiki, the seventh phase of technical reform began in the first half of 2022, and is expected to be completed in the third quarter. In terms of the Guangdong base, the company has made significant progress in the construction of the Yangjiang Dajin Offshore Engineering Base. It is expected that the first phase of 200,000 tons of production capacity will be formed by the end of the third quarter of 2022. In addition, the company is also actively deploying in Shantou and other places. In the future, the Guangdong base is expected to contribute significantly to an increase in offshore wind power business. In the first half of the year, the company received a pipe pile order for a British offshore wind power project, achieving a major breakthrough in offshore wind power exports. In the future, the company will further improve its production technical capacity and on-time delivery capacity for European offshore wind power products, and strive to become a mainstream supplier of offshore wind power in Europe.

Businesses such as power plants are expected to become important performance growth points in the future. The company began investment and construction of wind farms in 2021. The 300,000 kilowatt wind power project currently under construction is scheduled to be connected to the grid for power generation in the second half of 2022, and is expected to bring a profit contribution of about 100 million yuan in 2023; the company plans to build a grid-connected 2 million kilowatt new energy project within three years and reserve 5 million kilowatts of new energy development resources. At that time, the profit contribution of the wind power operation business is quite impressive. In addition, the company plans and lays out blade production capacity in places such as Penglai, Fuxin, and Zhangjiakou to create new performance growth points.

An increase in volume can be expected in the second half of the year. In the first half of the year, the company faced adverse factors such as insufficient domestic and foreign demand, the epidemic, and high raw material prices. Looking ahead to the second half of the year, domestic onshore and offshore wind power demand is entering the peak season, raw material prices have declined, and both the demand side and the cost side have experienced marginal improvements. From a structural point of view, the second half of the year will be a centralized delivery period for domestic offshore wind power orders and export offshore wind orders, and the increase in the share of offshore wind power business will further boost the company's profit level.

Investment advice. Taking into account factors such as the progress of production capacity expansion and the competitive pattern of the export business, the company's profit forecast is estimated to be 8.06 to 1,365 million yuan in 2022-2023 (the original forecast value is 8.97 million yuan, 1,359 million yuan), corresponding EPS of 1.45 and 2.46 yuan (not considering future share capital increases due to non-public offerings), and dynamic PE of 33.2 and 19.6 times. Offshore wind power has a lot of room for growth. The company has the potential to become the world's leading offshore wind power pipe pile, maintaining the company's “recommended” rating.

Risk warning. 1) The progress of the new offshore wind power pipe pile production base fell short of expectations; 2) the scale of offshore wind power installed fell short of expectations; 3) large fluctuations in raw material prices and exchange rate fluctuations may have an impact on the company's profit level; 4) increased competition in the industry and profit levels fell short of expectations.