3Q23 performance is lower than market expectations.
The company announced 3Q23 results: income 516 million yuan, year-on-year-0.7%, month-on-month-3.9%; return to the mother of net profit to achieve a loss of 69.87 million yuan, compared with the same month-on-month loss. The company's 3Q23 performance is lower than market expectations, mainly because 1) 3Q23 production shipments are not full, the decline in pre-processing fees and the increase in new capacity climbing depreciation together pull down profit margins; 2) 3Q23 provides for an impairment loss of 74 million yuan; and 3) the holding wind farm is basically not profitable due to the poor wind.
3Q23 product shipments and profit margins are not good, and the performance of the power plant business continues to be sluggish. Company 3Q23 achieved sea breeze tower and fan basic product shipment of 64000 tons, compared with 1Q23 and 2Q23 remained relatively stable, failed to show a strong shipment, mainly due to poor progress of downstream project construction. 3Q23's comprehensive gross profit margin reached 6.6%, a month-on-month decline in 8.6ppt, mainly due to the decline in pre-order processing fees and the increase in uphill depreciation of new capacity. Wind farms owned by 3Q23 continued to perform poorly, mainly due to a month-on-month decline in the number of power generation hours due to poor 3Q wind conditions.
Trend of development
The start of the domestic sea breeze is accelerating, the shipments of sea breeze towers and wind turbines are expected to increase gradually, and the company's excellent layout is expected to be harvested in 2024. Over the past year or so, the construction of sea breeze projects in Yangjiang, Jiangsu and other regions of Guangdong has been affected by different factors. Recently, we have observed that many regional projects across the country are accelerating construction, especially in Jiangsu, Guangxi, Hainan and other regions. Guangdong and other regions will gradually catch up. We judge that the sea breeze industry near the end of 2023 is expected to enter a period of intensive construction. The supply and demand situation and delivery rhythm of sea breeze towers and fans are expected to improve, and industry shipments are expected to enter the stage of accelerated delivery from 4Q23. Haili Wind Power has planned production expansion projects in many places in China to continuously enhance the market competitiveness of multi-regions, and we believe that the company is expected to make full gains in 2024.
Profit forecast and valuation
Taking into account the company's weak product shipment performance this year, poor earnings from shareholding wind farms and the impact of impairment losses, we downgrade the company's 2023 net profit forecast of 65.9% to 143 million yuan. Considering that the profit per ton of sea breeze towers and wind turbines in the industry is still relatively weak, we reduce the company's net profit by 12.6% to 717 million yuan in 2024. The company's current share price corresponds to a price-to-earnings ratio of 19.7 times 2024.
Maintain the company's outperform industry rating. Taking into account the recent landing of many factors restricting the promotion of projects in the domestic offshore wind power industry, we are optimistic that the company will continue to benefit from the prosperity of the sea wind industry by virtue of the layout of high-quality production capacity, and we maintain the target price of 75.4 yuan, corresponding to 22.9 times price-to-earnings ratio in 2024, which has 16.1% upward space compared with the current stock price.
Risk
The progress of offshore wind power is not as expected; the progress of capacity expansion is not as expected; and the intensification of competition in the industry affects profits.