The company announced its semi-annual report for 2023. In the first half of 2023, the company achieved operating income of 846 million yuan, a year-on-year increase of 4.32%, and a year-on-year net profit of 55 million yuan, an increase of 30.10% over the previous year; in a single second quarter, operating income of 414 million yuan, a year-on-year decrease of 5.87%, and a year-on-year net profit of 26 million yuan, an increase of -12.83% over the previous year. As a wind power flange leader, the company is actively expanding its bearing business. With the gradual release of sea-wind demand and the expansion of the bearing business, the company's situation on the revenue side and profit side is expected to continue to improve. Furthermore, by setting up a joint venture, the company is entering the computing power leasing business, which is expected to bring new growth impetus and maintain purchase ratings.

Key points to support ratings

The wind power flange business is developing steadily, and there was a slight increase in performance in the first half of the year. With the gradual release of demand for downstream wind power installations, the company achieved revenue of 846 million yuan in the first half of 2023, an increase of 4.32% over the previous year. Among them, wind power flanges achieved revenue of 409 million yuan, accounting for 48.37% of revenue, an increase of 6.78% over the previous year. Affected by fluctuations in tower flange prices and falling raw material prices, product gross margin gradually improved. In the first half of 2023, the company's overall gross profit margin was 14.20%, an increase of 2.54 pct over the previous year. Among them, the gross margin of wind power flanges was 14.03%, an increase of 2.94 pct over the previous year.

Demand for wind power installations has gradually been released, and the company's profitability has improved markedly. In terms of cost rate, in the first half of 2023, the company's sales/management/R&D/financial expense ratio was 0.57%/3.23%/-1.75%, respectively, compared to +0.08pct/-0.05pct/+1.34pct/-1.75%. Among them, the significant increase in R&D expenses was due to the increase in R&D expenses for the subsidiary Hengrun transmission bearing project. The significant decline in the financial expense ratio was due to increased interest income and exchange rate fluctuations, but overall the company's overall cost rate remained stable during the period. In terms of net profit, the company achieved net profit of 55 million yuan in the first half of the year, an increase of 30.10% over the previous year. The overall net interest rate was 6.53%, an increase of 1.29 pct over the previous year.

Set up a joint venture to enter the computing power field and build a Yangtze River Delta GPU computing power center cluster to provide new growth poles. In order to follow the wave of the digital economy and enter a new digital energy computing power integration track, on July 28, the company and Shanghai Liuzhu Technology Group Co., Ltd. signed a “Joint Venture Contract” to jointly fund the establishment of Shanghai Runliuzhu Technology Co., Ltd., and plans to cooperate in Shanghai, Fuzhou Economic Development Zone, Anhui Wuhu, Jining, Shandong, etc., and build a Yangtze River Delta GPU computing center cluster. The Shanghai Six Foot Core Team has been deeply involved in GPU computing power for many years. It has rich experience in building and operating AI intelligent computing centers (GPU computing power) and computing power market resources, and has deep cooperative relationships with upstream GPU suppliers such as Nvidia and Xinhua III. The company teamed up with Shanghai Six Feet to lay out the computing power leasing business, which is expected to become the company's new performance growth pole.

valuations

According to the progress of the company's flange shipping and computing power leasing business, we adjusted our profit forecast. We expect operating income from 2023-2025 to be 26.47/50.58/6.930 billion yuan, and net profit attributable to parent income of 2.05/665/927 million yuan. The corresponding PE is 64.5/19.9/14.2 times, maintaining the purchase rating.

The main risks faced by ratings

Wind power installations fell short of expectations; implementation progress of new products such as bearings and gearboxes fell short of expectations; risk of rising raw material prices; risk of increased competition in the industry; and progress in the computing power leasing business fell short of expectations.