Revenue in 2022 fell 15.20% year over year, and net profit of the mother fell 78.55% year over year. The company achieved revenue of 1,945 million yuan in 2022, down 15.20% from the previous year; the net profit of the mother was 95 million yuan, down 78.55% from the previous year. The company's gross margins and net profit margins in 2022 were 10.93%/4.87% respectively, a decrease of 13.36/14.30 pcts over the previous year. The decline in profitability was mainly due to a decrease in orders for wind power flange products and a drop in the gross margin of wind turbine tower flanges. The decline in performance is mainly due to: 1) there was a phased decline in the country's new installed capacity in wind power in 2022, the bidding price of wind turbines fell, competition intensified, and profit margins were squeezed; 2) the wind power bearing production line was under construction, and production capacity was still climbing. The sales/management/finance/R&D expense ratio in 2022 was 0.48%/3.29%/-0.77%/2.97%, respectively. The year-on-year change was -0.06/-0.21/-2.03/-0.88 pct, and the cost rate for the period fell 2.3 pcts year over year.
The company is the domestic wind turbine tower flange leader, and Xintuo's bearing business is growing rapidly. The company is an important supplier of offshore wind turbine tower flanges and is in a leading position among similar products in the same industry worldwide. By product, the revenue of rolled ring forgings/forged flanges/other free forging/wind power bearings in 2022 was 998/2.50/0.44/112 million yuan respectively, with a year-on-year change of -21.38%/-13.02%/+33.35%/+100%. Wind power bearings increased significantly due to the large increase in wind power bearings due to the large increase in the three rows of independent propeller bearings newly developed by subsidiary Hengrun Transmission, which achieved mass production and sales. By region, the company's domestic sales/export sales reached 790/614 million yuan respectively in 2022, a year-on-year change of -44.06%/+133.79%, and overseas revenue rose sharply.
Fundraising projects continue to advance to support the company's future growth. In terms of wind turbine tower flanges, in line with wind power industry trends and market demand, the company focused on the development and production of large megawatt wind turbine tower flanges. Hengrun Ring Forged achieved mass production of wind turbine tower flanges of 10MW and above in the existing plant, and completed the technical upgrade from 7MW to 9MW to 12MW. In terms of wind power bearings, the “Annual Production Line Project of 4000 Sets of Large Wind Power Bearings” was put into use in July 2022. Hengrun Drive's new product, 6MW three-row independent propeller bearings, was mass-produced in the fourth quarter. The 8MW independent propeller bearing was in the bench testing and certification stage. The company completed a rise in wind power bearing production capacity from zero to 150 sets/month, marking the success of the company's industrial chain upgrade. Furthermore, the progress of the company's “large-scale finishing forging capacity expansion project for 12 MW offshore wind turbines with an annual output of 50,000 tons” project was postponed until December 2023; the “100,000 tons/year gear forging and deep processing project” is expected to be completed in December 2023.
Risk warning: New project commissioning falls short of expectations; risk of changes in industrial policy; risk of fluctuations in raw material prices.
Investment advice: The company's dominant position in the wind turbine tower field is stable. Entering the wind power bearing business opens up incremental space. Considering the prudent start of wind power, we lowered the company's net profit of 2023-2025 to 3.75/611/800 million (the value before 23/24 was 4.31/7.31), corresponding to the PE value 24/14/11 times, maintaining the “buy” rating.