Short-term performance was under pressure, with 2023H1 net profit falling 58% year on year. In the first half of 2023, the company achieved revenue of 1,215 million yuan, down 4% year on year; net profit of 110 million yuan, down 58% year on year; net profit of non-return net profit of 124 million yuan, down 49% year on year. By business, slewing bearing revenue was 926 million yuan, down 12% year on year; locked plate revenue was 167 million yuan, up 33% year on year. The 2023H1 performance decline is mainly due to the decline in spindle bearing shipments: Due to changes in the technical path of downstream customers, the company's double-row conical spindle bearing shipments continue to decline, while self-aligning roller spindles and single-row conical spindle bearings are still in the small-batch production stage, leading to an overall decline in spindle bearing shipments; 2) Yaw propeller bearing price decline: Yaw propeller bearing market competition is intense. In order to protect market share, the company lowered the price of yaw bearing. In 2023Q2 alone, the company achieved revenue of 708 million yuan, up 15% year on year and 40% month on month; net profit of 56.37 million yuan, down 61% year on year and 27% month on month; net profit after deducting non-return net profit of 63.55 million yuan, down 45% year on year and 6% month on month.
Profitability is under pressure. 2023H1 gross margin fell 5.38 pct1) Profitability: In the first half of 2023, the company's gross sales margin was 25.9%, down 5.38 pct year on year; net sales interest rate was 9.1%, down 10.71 pct year on year. The year-on-year decline in profitability is mainly due to 1) the decline in the price of yaw propeller bearing products 2) the decline in shipments of high-margin spindle bearings. In 2023Q2 alone, gross sales margin was 25.2%, down 2.9 pct year on year, down 1.85 pct from month on month; net interest rate was 8.7%, down 15.34 pct year on year, down 0.92 pct from month on month. 2) Expense rate for the period. The cost rate for the first half of 2023 was about 11.31%, an increase of 0.84 pct over the previous year. Among them, sales, management, finance, and R&D expenses were 0.79%, 2.72%, 2.6%, and 5.19%, respectively, with year-on-year changes of +0.55, +0.65, -1.31, and 0.95 pct.
The wind power industry is booming plus domestic replacement, and the company's long-term performance can be expected 1) The wind power industry is booming: ① In the short term, according to the wind energy professional committee's forecast, the new installed capacity of wind power in China will reach 70-80 GW in 2023, an increase of 40%-60% over the previous year. ② In the long run, it is estimated that the “14th Five-Year Plan” wind power will add 70 GW of installed capacity per year, and the new installed CAGR from 2022-2025 will be 22%. 2) Domestic replacement: As the core component of fans, wind power bearings have characteristics such as high technical barriers and high added value, and are the component with the lowest localization rate. With the decline in fan tender prices, domestic wind power bearing technology continues to break through, the domestic replacement process for spindle bearings accelerates, and domestic replacement of gearbox bearings is on the agenda. Furthermore, in 2022, convertible bonds were issued with forward-looking layout gearbox bearings to complete the product matrix. According to the official public account released by Xin'an County, the company's gearbox project is divided into three workshops for gearbox bearings, gear shaft parts, and heat treatment. At present, the gearbox bearing infrastructure has been completed, and basic equipment construction is underway. It is expected that the equipment will be put into operation around September; production of a continuous furnace production line in the heat treatment workshop has begun, and the warning route is being installed and commissioned; the gear parts are scheduled to be upgraded in 2024.
Profit forecasting and valuation
Net profit for 2023-2025 is estimated to be about 319 million, 479 million yuan, and 608 million yuan respectively, up 1%, 50%, and 27% year-on-year, corresponding to PE 31, 21, and 16 times, maintaining the “buy” rating.
Risk warning: 1) The risk that the competitive landscape will worsen; 2) New wind power installations fall short of expectations.