State-owned assets holding capacity development, continue to promote multi-field layout

As a wind power spindle head enterprise, the company has been ploughing the field of wind electric forgings for many years. In 2020, Zhuhai State assets will become the controlling shareholder and actual controller of the company, which is expected to further empower the business development of the company. Based on the integrated manufacturing platform of industrial equipment, the company continues to promote the development of pipe moulds and other forgings, powder alloys and other non-wind power products while carrying out wind power business such as wind power spindles and castings. At present, the company is mainly engaged in wind power business, and the proportion of revenue has been maintained at 50% or more in recent years. In recent years, benefiting from the advantages of integrated manufacturing platform, the company's revenue has continued to grow. The company's 2022 return net profit is affected by the periodic decline in wind power industry installation, which is under pressure in the short term. It is expected that with the gradual recovery of wind power industry installation in 2023, the return net profit is expected to be significantly repaired.

Wind power business ploughs castings and forgings to increase efficiency, expand production and deepen competitive advantage

Wind power business is the core business of the company. We believe that the company is expected to rely on outstanding competitive advantages to promote the sustained and rapid growth of wind power business, mainly because: 1) from the industry level, the certainty of wind power installation growth this year is high, and the industry chain is actively realized. The high prosperity of wind power bidding in 2022 will lay the foundation for the growth of wind power installation in 2023. We expect that wind power installation in 2023 is expected to reach 70-80GW, of which Haifeng installed about 8GW, which is expected to double year-on-year high growth. The return net profit of 2023Q1 parts enterprises ushered in active repair, and the new installed capacity from January to May this year achieved a relatively large increase of 51.2% compared with the same period last year. At the same time, the economy of sea breeze has a strong support, and the provinces actively promote the construction of sea breeze. Since 2023, Fujian and Guangdong have issued sea breeze competitions one after another. It is expected that with the improvement of sea breeze economy and the promotion of the project, the installed scale of sea breeze is expected to continue to expand in the future. 2) from the company level, the comprehensive advantages of the company's wind power business are outstanding, and it is still promoting production cost reduction and sea breeze capacity layout. In terms of wind power spindle, the company ranks in the top two of the industry, covering a wide range of front-line wind turbine enterprises, and the company promotes the landing of large-scale die forging equipment, which is expected to reduce costs and increase efficiency; at the same time, the company actively promotes the research and development of foundry spindles and takes the lead in large-scale shipping. In terms of castings and stator and rotor, the company's revenue scale industry is in the forefront, and actively promote the layout of sea breeze MW stator and rotor, which is expected to benefit from the volume of sea breeze at home and abroad in the future. In terms of wind power equipment and modular business, the company continues to deepen cooperation with mainframe factories, and revenue from this business is expected to maintain growth.

Actively develop non-wind power business and contribute important support for business growth

In addition to wind power products, the company gives full play to the advantages of a comprehensive manufacturing platform to actively expand non-wind power products such as pipe moulds and other castings and forgings to support steady growth in revenue. Specifically: 1) pipe dies and other forgings: sharing forging capacity with wind power forging spindles can ensure capacity utilization in a downturn in the wind power industry, while maintaining a high gross profit margin of more than 20%. 2) forging billet:

It is produced by Baotai Machinery, a wholly-owned subsidiary, giving priority to ensuring its own production needs, and the surplus parts are exported. Revenue has continued to grow in recent years, and profits in 2022 have been repaired by falling prices of raw materials. 3) Alloy materials: previously, it was mainly produced and developed by Jinan Yecke, a wholly-owned subsidiary. At present, the company has set up Tongyu new materials to integrate Jinan smelter's equity and resources, which is expected to contribute to new increments in performance in the future.

Investment suggestion

To sum up, we believe that with the support of rapid domestic wind power installation in 2023, the company is expected to achieve restorative growth.

At the same time, the company continues to promote production efficiency and cost reduction and capacity expansion of sea wind products in the field of wind power parts, which is expected to further enhance the company's competitiveness and benefit from the growth of the industry; and the company has also formed a strong layout in the non-wind power field. to achieve strong support for the company's business performance growth, to avoid the impact of economic fluctuations in a single industry to a certain extent. It is estimated that the return net profit of the company in 2023 and 2024 is about 4.7 and 570 million yuan, corresponding to 22 and 18 times of PE in 2023 and 2024. Cover for the first time, giving a "buy" rating.

Risk hint

1, the installed capacity of the wind power industry is not as expected; 2, the risk of the deterioration of the competition pattern of the industry; 3, the risk that the profit forecast hypothesis is not established or not as expected.