Event: Tianneng heavy Industry released its three-quarter report in 2019. In the first three quarters, the company realized revenue of 1.485 billion yuan (+ yoy91.50%), net profit of 146 million yuan (+ yoy143.10%), net cash flow of operating activities of 139 million yuan (+ yoy134.50%), and weighted average return on net assets of 7.97%, an increase of 4.45pcts over the same period last year. Among them, Q3 achieved a revenue of 630 million yuan (+ yoy58.03%) in a single quarter and a net profit of 62 million yuan (+ yoy109.95%).
Benefiting from the recovery of the wind power industry, tower tube orders and sales revenue increased significantly: the company's performance increased significantly in the first three quarters, mainly due to: 1) the overall recovery of the domestic wind power industry led to the continuous growth of orders and sales for wind turbine tower projects (including offshore wind power towers and pile foundations). By the end of the third quarter, the company's tower tube orders totaled about 3.525 billion yuan. In the first three quarters, the sales volume of fan towers reached 176200 tons, and the sales revenue increased significantly by 91.5% compared with the same period last year. 2) in the first three quarters of this year, the prices of medium and thick plates, the main raw materials of fan towers, have declined and are relatively stable compared with the same period last year. The substantial increase in revenue and a steady decline in costs have increased the gross profit margin of the tower tube, and the net profit has increased by 142.8% compared with the same period last year. 3) the photovoltaic power station held by the company and the acquisition of Jiangyin Vision Huili Energy Co., Ltd. (the wind farm with installed capacity of 74.8MW) in the first half of the year contributed to the company's benefits. Since the third quarter of this year, steel prices have declined, which is expected to bring some flexibility to the company's performance in the fourth quarter and next year. At present, the layout of the company's tower tube production base has been expanded to 8, with a total production capacity of about 295500 tons. At the same time, the company extends the layout of the construction and operation of downstream wind farms, so as to strengthen strategic cooperation with wind power mainframe plants, which is expected to form a good synergy effect.
The rapid advance of offshore wind power and high-power towers is expected to improve performance contribution: in 2019, with the increase of offshore wind power projects in Guangdong, Jiangsu and other regions, offshore installation is expected to meet rapid growth. The company will also rely on Jiangsu Tianneng to improve its position and market competitiveness in the field of middle and high-end tower barrel manufacturing. In addition, the Jiangsu part of the company's 3.0MW and above fan tower production project was officially put into production in October 18, with a net profit of 19.03 million yuan in the first half of this year. The part of the project located in Jiaozhou was trial-produced in April 2019 and is expected to begin to contribute profits in the second half of the year.
New energy power generation is promoted in parallel and expanded to downstream operators: since 2018, the company has actively developed new energy business, building and operating wind farms and photovoltaic power stations, which has become an important source of profits for the company. As of the first half of this year, the company has a total capacity of about 100MW of photovoltaic power stations and has obtained cumulative wind farm approval from 190MW, of which two phases of the Texas project are under construction, of which the first phase of the Texas 50MW wind farm project is planned to be connected to the grid this year and will contribute to power generation revenue from 2020.
Investment advice: we expect the company's net profit from 2019 to 2021 to be 249 million, 339 million and 378 million respectively, with a net profit growth rate of 143.2%, 36.2% and 11.5% respectively.
Risk tips: wind power installation is not as expected, steel prices rise unilaterally, wind farm grid rhythm is not as expected, and so on.