High-end equipment sector: The Haifeng business is poised to start. Material handling equipment+ships and supporting equipment are moving forward in parallel 1, production capacity+terminal are taking a two-pronged approach, and the Haifeng business is on a fast track of development.
(1) Production capacity: By the end of '22, the company had a production capacity of 300,000 tons of offshore wind power foundation piles and conduit frames.
In February 2023, Runbang Heavy Machinery plans to invest in the “Tongzhou Bay Equipment Manufacturing Base Project”, which is expected to further expand the company's production capacity layout. Combined with Guangzhou Industrial Control's entry, it is expected that it will also help the company plan and build high-end equipment bases in the South, expand market coverage, and further open up market space in Liangguang, Hainan, Southeast Asia and other places.
(2) Wharf: Currently, the company has two own terminals - Jiangsu Taicang Runhe Wharf and Qidong Runbang Ocean Wharf. Among them, Taicang Runhe Wharf is a 50,000-ton public grocery terminal, and Qidong Runbang Ocean Wharf is a 50,000-ton multi-purpose terminal under customs supervision. With the deep-sea development of Seabreeze, seabreeze equipment has higher requirements for terminals, and the scarcity of terminal resources gives manufacturers with wharves a competitive advantage, further improving their market position.
(3) The high boom in the industry catalyzes the company's performance: 2022 was affected by multiple factors such as the epidemic and rush back, and Haifeng's installation fell short of expectations (lifting caliber 5.16 GW). As the above factors were mitigated, and based on the 2022 Sea Wind tender (fan tender about 11.7 GW) and Haifeng's 14th Five-Year Plan, we expect a rapid increase in offshore wind power pile demand, driving up demand for offshore wind power piles. The company's orders are sufficient, matching production capacity layout, and contributing to increased performance.
2. The material handling equipment business has plenty of on-hand orders, and the shipping and supporting equipment industry is showing an upward cycle.
(1) Material handling equipment business: In 2022, the company received an additional contract order of 6.6 billion yuan for bulk equipment from UAE customers, and won bids for various material handling equipment such as bulk equipment. As orders are gradually digested, it is expected to contribute to stable revenue. Furthermore, the company's acquisition of the Kalmar (Kalmar) port container crane business in July 2022 will further enrich the product line of the high-end equipment business and enhance its core competitiveness in the global port machinery market.
(2) Ship and ancillary equipment business: At the beginning of 2021, the number of new orders received by China's shipbuilding industry surged, reaching 62.31 million DWT, YOY +151%. However, there was a time lag between ship orders and ship supporting equipment orders. The rapid increase in revenue from the company's ship accessories and ancillary equipment business began to be reflected in 2022, achieving revenue of 4.6 billion yuan and YOY +679% in 2022.
Environmental protection sector: Accumulated goodwill impairment of 480 million yuan. The lightweight packaging industry was steadily affected by the ongoing impact of the epidemic. Market competition intensified due to insufficient upstream waste production, combined with the release of production capacity in the hazardous waste treatment industry. Gross margin declined to a certain extent, causing the subsidiary CNPC Environmental Protection (engaged in hazardous waste medical waste treatment business) to fail to meet its performance commitment targets. In 2022, it was confirmed that performance compensation was recorded as non-recurring profit and loss. With the calculation of goodwill depreciation completed, the company will go to the battle lightly, and will make full use of existing production capacity in the environmental protection sector to further improve capacity utilization.
Investment advice: We expect the company to achieve net profit of 3.5/44/ 5.2 billion yuan in 2023-2025, an increase of 565%/24%/18% over the previous year. The current stock price corresponding to PE is 14/11/10 times, maintaining the “buy” rating.
Risk warning: Haifeng's installation falls short of expectations; market competition increases risk; order absorption falls short of expectations; risk of impairment of goodwill, etc.