Matters: Tianneng Heavy Industries announced on September 27 that the company became the winning candidate for the “CGN Inner Mongolia Xinganmeng Wind Farm Tower Procurement - Bid Section 2”. The bid section involved 351 tower procurement requirements. The pre-bid amount was 925 million yuan, accounting for 66% of the audited revenue in 2018. The company has yet to receive a notice of winning the bid, and there is uncertainty about whether it will win the bid in the end and whether it will be able to sign a formal contract. Guoxin Telecom's new view: 1) If the company successfully wins the 900 million bid, it will increase the company's annual operating income by at least 270 million yuan over the next three years, equivalent to 19% of the company's audited operating income in 2018, significantly improving the company's performance growth. 2) The company can take this opportunity to increase production capacity by 100,000 tons in Inner Mongolia, which is equivalent to one-third of the current production capacity, which is conducive to reducing transportation costs in Inner Mongolia, increasing bidding competitiveness, and increasing net sales interest rates. 3) The company's increased production capacity layout in Inner Mongolia is conducive to strengthening cooperation and stickiness with major customers of central enterprises and consolidating competitive strength. 4) Risk warning: The company failed to successfully win the bid or sign a supply contract; the company's product quality problems affected order delivery; the rapid rise in steel prices eroded the company's profitability. 5) Investment advice: Tianneng Heavy Industries is a leading wind tower enterprise in China. It has a wide production capacity layout in the Sanbei region, the Yellow River basin and the Jiangsu coast. It is leading the industry in terms of transportation economy, while maintaining good cooperative relationships with customers of large power companies. The company became a candidate to win the 900 million bid. If it wins the bid, production is expected to expand by 33% (100,000 tons), and performance growth over the next three years is determined. As a result, the company's net profit forecast for 2019/20/21 was raised to 279/48/557 million yuan, and the company's reasonable valuation range was raised to 22.26-29.11 yuan/share (original range: 17.36-23.03 yuan/share, valuation center increased 25%), 18-54% over the current stock price, corresponding to 17.9-23.5 times PE in 2019, maintaining the “buy” rating. Comment: CGN (Xinganmeng) New Energy Co., Ltd. recently published the “CGN Inner Mongolia Xinganmeng Wind Farm Tower Procurement - Bidding Section 2 Announcement” on the CGN e-commerce platform. The company is the winning candidate for “CGN Inner Mongolia Xinganmeng Wind Farm Tower Procurement - Bid Section 2”. The company is the winning candidate for “CGN Inner Mongolia Xinganmeng Wind Farm Tower Procurement - Bid Section 2”. Project Overview: CGN Inner Mongolia Xinganmeng Wind Farm Tower Procurement Criteria-2. A total of 351 towers were purchased. The pre-bid amount was 925,159,848.00 yuan, accounting for 66.39% of the total audited revenue in 2018. After winning the pre-bid, if the company can officially win the bid and sign a formal contract and successfully implement it, it will have a positive impact on future business performance. It is estimated that annual revenue will increase by 270 million yuan, wind tower sales will increase by about 28,000 tons per year, and increase performance by more than 29 million yuan per year based on net profit of 1,050 yuan per ton of steel. The details and implementation period of the above projects are subject to the signed formal contract. As of the announcement date, the company has not received a notice of winning the bid, and there is uncertainty about whether the company will win the bid in the end and whether it will be able to sign a formal contract. Currently, there are still a number of Sanbei University base projects starting preliminary work. The company has strong market competitiveness. At the beginning of September this year, the evaluation results of investment enterprises in the 1.6 GW wind power base in the Inner Mongolia Alxa League region supporting DC UHV from Shanghai were announced. The base plans to have the conditions for commencement of construction by the end of December 2019. Currently, the evaluation results have been announced. According to regulations, investment enterprises must start construction within 6 months after signing the development agreement; in the first half of this year, the China Power Investment Wulanchabu 6GW affordable project also completed the fan bidding work. The above 2 projects alone totaled 7.6 GW (equivalent to the demand for 600,000 to 700,000 tons of wind towers). It is expected that the Inner Mongolia region will usher in large-scale wind tower demand in 2020-2021. Currently, the production capacity of the original wind tower in Sanbei cannot meet the requirements of large fans. In addition, the large base has extremely strict requirements on wind tower product quality and suppliers, it is expected that wind tower orders from the Sanbei base will be concentrated in the hands of a few leading domestic companies in the industry. Currently, Tianneng Heavy Industries is the company with the largest number of production bases covering the three northern markets in China, with production bases in Jilin, Xinjiang, Shandong, and Shanxi. If it wins the bid for the Xinganmeng project, the company will deploy the production capacity of the Inner Mongolia region and enhance its competitiveness to participate further in other major base projects. Offshore wind power is being intensively started. The company will benefit from the development of the offshore market in Jiangsu. Up to now, the offshore wind power projects officially approved by China before the end of 2018 but not yet hoisted have a capacity of 16 GW. If connected to the grid by the end of 2021, the offshore and intertidal zone projects will maintain the benchmark electricity price of 0.85/0.75 yuan per kilowatt-hour. Otherwise, feed-in tariffs will fall below 0.75/0.47 yuan, and many offshore projects face a drop in electricity prices of more than 12%, while intertidal zone projects face a drop in electricity prices of more than 40%. As of the end of June 2019, China has tendered and unhoisted offshore wind power projects with a total capacity of 10.9 GW. The above projects are the main source for China's offshore wind power installation projects in 2019-2021; and the Jiangsu region is the offshore wind power market with the most advantage in China's current geological conditions and installed capacity scale effects. Tianneng Heavy Industries has a 100,000 ton offshore wind tower base in Xiangshui, Jiangsu. It is expected that production capacity utilization will be saturated in the next few years, contributing to good performance. Investment advice: Raise the company's profit forecast, reasonable valuation range of 21.80-28.66 yuan/share, and maintain the buying rating. As a leading wind tower company in China, Tianneng Heavy Industries has a forward-looking layout in the Sanbei and offshore wind power markets. Recently, it is also expected to win a bid of 900 million, and its performance growth over the next three years has been determined. The company's net profit forecast for 2019/20/21 was raised to 279/45/557 million, up 0/11/ 22% from the previous forecast (2.79/4.11/458 million yuan), corresponding to EPS of 1.24/2.03/2.47 yuan, and 15.2/9.3/7.6X corresponding to the current stock price PE of 15.2/9.3/7.6X. The company's reasonable valuation range was increased by 22.26-29.11 yuan/share (the original range was 17.36-23.03 yuan/share, the valuation center increased 25%), with a premium of 18-54% over the current stock price, corresponding to the 2019 PE of 17.9-23.5 times, maintaining the “buy” rating.