Matters:
The company released its three-quarter report for 2023. The first three quarters achieved revenue of 3,333 billion yuan, a year-on-year decrease of 10.09%; net profit of 408 million yuan, an increase of 24.20% over the previous year; and net profit after deducting net profit of 377 million yuan, an increase of 24.07% over the previous year. In the third quarter, the company achieved revenue of 1,272 billion yuan, a year-on-year decrease of 10.90%, and net profit of 135 million yuan, a year-on-year decrease of 11.34%.
Ping An's point of view:
Gross margin remained high, and operating cash flow improved. In the third quarter, the company's revenue scale increased slightly month-on-month, with a gross profit margin of 24.58%, which remained relatively high. Net profit declined month-on-month due to factors such as impairment and increased management expenses. The company's comprehensive gross profit margin for the first three quarters was 24.20%, an increase of 7.51 percentage points over the previous year, mainly due to increased sales prices and profitability driven by product structure optimization. In the third quarter, while guaranteeing profit levels, the company stepped up repayment efforts. Net operating cash flow increased by 393 million yuan in a single quarter. Cash flow from operating activities improved markedly year-on-year in the first three quarters.
The export business has shown explosive growth, and the expansion of overseas markets continues to increase. In the first three quarters, the company's overseas business revenue increased by 71.50% year on year. Among them, export revenue from offshore industry showed explosive growth, with a year-on-year increase of 5578.23%. As of the disclosure date of the three-quarter report, the company supplied the UK Moray Wes T offshore wind farm single pile project, and a total of five ships have been shipped out of port. The final single ship will be shipped within the year according to the delivery plan. It is expected that all 48 single piles of the project will confirm revenue within the year. The company is participating in tenders for various offshore projects in Europe, Japan, and the United States, with a total demand of nearly 3 million tons, involving offshore products such as pipe piles, conduit racks, and floating foundations. It is expected that the tender results will be obtained one after another in 2024-2027.
Accelerate structural adjustments and shift from “want quantity” to “want quality”. The company is promoting high-quality development through restructuring, including market structure adjustment, product structure adjustment, capacity adjustment, organizational structure adjustment, etc.
The focus of the company's future market expansion is shifting from overseas and offshore to focusing on overseas offshore wind power markets. The focus is on providing high-quality offshore products for offshore wind power markets in developed countries around the world with high technical standards, high quality requirements, and high added value, including offshore pipe piles, next-generation conduit racks, and floating foundations. In terms of domestic business, the company focuses on risk prevention to ensure order quality and settlement risks are manageable.
Investment advice. Taking into account the uncertainty of the delivery cycle of overseas orders and the pace of progress of overseas projects affected by factors such as inflation, etc., the company's profit forecast was adjusted. The estimated net profit of the mother for 2023-2025 is 5.84, 7.59, and 1,141 billion yuan (original forecast values of 9.31, 13.54, and 1,854 billion yuan), respectively, with dynamic PE 30.5, 23.4, and 15.6 times.
In the short term, due to factors such as the pace of product delivery and the upfront cost investment brought about by overseas market expansion, the company's export volume and profit of pipe pile products fell short of expectations; in the medium to long term, the overseas offshore wind power market has a lot of room for growth, and the company has increased its overseas market layout in recent years. It has now become the mainstream pipe pile supplier in the European and American offshore wind power markets. It has a clear first-mover advantage over major domestic competitors, and there is room for improvement in the volume and benefits of exporting pipe pile products in the future; we are optimistic about the company's future growth and maintain its “recommendation” rating.
Risk warning. 1) The installed scale of offshore wind power fell short of expectations; 2) Large fluctuations in raw material prices and exchange rate fluctuations may have an impact on the company's profit level; 3) Increased competition in the industry and profit levels fell short of expectations.