The company announced that the company and major shareholders jointly contributed 700 million yuan to set up a subsidiary to engage in the investment, construction and operation of wind farm projects. The company contributed 600 million yuan and held 85.71% equity, while the actual controller, Mr. Bao Shijin, contributed 100 million yuan and held 14.29% equity. The company is officially involved in the wind farm operation business in the lower reaches of the industrial chain.
The business return of wind farm operation is stable, which enhances the overall value of the company. Due to the implementation of the wind power feed-in price and the annual decline in installation costs in recent years, wind farm operation has become the most prominent profitability link in the upstream and downstream of the wind power industry chain. The gross profit margin (more than 40%) is significantly higher than that of equipment manufacturing (about 20%). At present, the internal rate of return of wind farm projects is between 10-20%, providing a long-term stable and attractive return on funds. The company's entry into the wind farm operation business will help to maximize the value.
The registered capital of the subsidiary corresponds to the contract to install 500MW, which is enough to make the company occupy a place in the industry. The company set up a subsidiary with a registered capital of 700 million yuan, and according to the 20% of its own capital investment in the wind farm operation, it can support the company to develop 500MW wind power projects. The company currently has more than 700 million yuan in cash on hand, and the asset-liability ratio is less than 40%. This investment will not cause great financial pressure on the company. We expect the company to continue to increase investment in this business in the future, and the wind power operation business is expected to become an important part of the company's business in the future.
The synergy between the new business and the original business is significant, which helps to maximize business value. The company is involved in the wind power operation business, and the existing customers will become the suppliers of the wind farm projects, that is, the company will become the "customers of the original customers".
This will not only help to strengthen the relationship between the company and the upstream and downstream of the industrial chain, but also enhance the bargaining power of the original casting business, which is expected to maximize the overall profit space of the upstream and downstream of the industrial chain.
Maintain earnings forecast and upgrade to buy. As the company has not yet announced the specific investment scale and timing of the wind farm project, we maintain the original profit forecast: we expect the company to achieve earnings per share of 0.17,0.23 and 0.29 yuan in 2014-2016, with a compound growth rate of about 143% in 2013-2016 and 32% in 2014-2016, corresponding to 37 times PE in 2015. Only based on the company's 500MW wind power project, we estimate that it can contribute 150-200 million yuan in net profit after it is put into production, and together with the original business can support the market capitalization of about 10 billion yuan. The large-scale investment in the company's follow-up wind power projects will open up new growth space for the market capitalization. Last week, the company's stock price fell due to market reasons, we think it precisely provides a better opportunity to intervene, it is recommended to buy!
