Incident: The company released its report for the third quarter of 2022. The company achieved revenue of 3.707 billion yuan in 2022/Q1-3, an increase of 16.57% over the previous year; net profit attributable to the parent company was 328 million yuan, a year-on-year decrease of 24.06%. Among them, in Q3 2022, revenue was 1,428 million yuan, down 5.29% year on year, and 6.05% month on month; net profit attributable to parent company was 153 million yuan, down 32.70% year on year and up 34.43% month on month. Q1-3 gross margin was 16.69%, down 7.23 pct year on year, Q3 gross profit margin was 23.15% year on year, down 2.53 pct year on year, up 11.11 pct from month on month; Q1-3 net profit margin was 8.86%, down 4.74 pct year on year, Q3 net interest rate to return to mother was 10.69%, down 4.36 pct year on year, up 2.26 pct year on month.
Gross margin increased month-on-month, and profits improved. According to our estimates, 2022Q3 towers shipped about 165,000 tons, an increase over the same period last month, but downstream installations were affected by the epidemic and individual bottlenecks in the industrial chain, and tower tube shipments fell short of expectations; gross profit per ton is expected to exceed 1,900 yuan, net profit per ton exceeds 800 yuan, and the share of tower exports and offshore shipments has increased. Profitability will increase further as export orders for single piles are shipped next year.
Haifeng's production capacity continues to expand, consolidating its first-mover export advantage. The production capacity of towers is expected to reach 1.2 million tons during the year, including 500,000 tons for land towers, 700,000 tons for sea towers and offshore engineering, and the company is actively deploying offshore engineering bases in eastern and western Guangdong to meet the explosion in offshore wind power demand at home and abroad. Since it is difficult for the production capacity of European pipe pile companies to match European demand for sea piles, the company is currently the only company that meets the export requirements of a single pile. With the completion of technical reforms at the Penglai base and the increase in delivery capacity, it is expected to obtain larger export orders and become the mainstream supplier of sea piles in Europe, consolidating the first-mover advantage in the export of Seabream products.
The increase in R&D costs has led to a sharp rise in the cost rate. 2022Q3, the cost rate for the period increased by 5.58 percentage points to 11.00%. Among them, sales, management (including R&D), R&D, and financial expenses were +6.87%/+40.84%/+51.45%/+220.57%, respectively, and the cost rates were 0.67%/9.61%/7.61%/0.72%, respectively.
Profit forecast and investment rating: Considering that downstream installations are affected by the epidemic and bottlenecks in individual links in the industrial chain, we lowered our 2022 profit forecast. We expect net profit to the mother for 2022/2023/2024 to be 559/12.73/1,830 million yuan (previous value of 797/1,23/1,585 million yuan), compared with -3%/128%/44%, EPS 1.01/2.29/3.29 yuan, corresponding to PE 30/13/9 times, maintaining the “buy” rating.
Risk warning: Domestic installation and capacity expansion fall short of expectations, rising raw material prices, export orders falling short of expectations, etc.