Matters:
On October 27, 2023, the company released its report for the third quarter of 2023. 2023Q1-3 achieved operating income of 12.6 billion yuan, +19.5% year-on-year; net profit of 270 million yuan, +32% year-on-year; net profit after deduction of 330 million yuan, +153.5% year-on-year. Among them, 2023Q3 achieved revenue of 4.38 billion yuan, +28.3%/+4.2%; month-on-month net profit of 0.7 billion yuan, +7.7%/-23.4%; net profit after deduction of 150 million yuan, +200.3%/+77% month-on-month.
Commentary:
Multi-business revenue increased slightly, and 2023Q1-3 wind turbine blade production was +92.6% year over year. By business sector, 2023Q1-3 automotive/rail transport/industrial and engineering/wind power revenue was 51.2/14.3/13.7/4.7/4.38 billion yuan respectively, of which 2023Q3 revenue was 18.2/5/4.4/1.57 billion yuan respectively, +6.5%/+1.8%/-4%/+10.1% over the previous year.
The prosperity of the wind power industry has rebounded compared to last year. Wind power blade production in the first three quarters was 12GW, +92.6% year-on-year; Q3 single-quarter production was 4.2 GW, -32.4%/-6.4% month-on-month.
Raw material prices have declined, and the company's gross margin has clearly recovered. In terms of profitability, benefiting from falling prices of raw materials, steel, resin, etc., the gross margin of 2023Q1-3 company was 16.1%, +4.6 pct; net profit margin was 1.7%, +0.01pct; 2023Q3 gross margin was 17.6%, same /month over +5.3 pct/+1.4 pct; net margin was 0.9%, same /month over month -0.4 pct/-1.1 pct. In terms of cost rate, the cost rate for 2023Q1-3 during the period was 13.6%, +4.1pct over the same period, of which the sales/management (including R&D) /financial expense ratio was 3.3%/10%/0.3%, respectively, and +1.2pct/+2.2pct/+0.6pct, respectively. The increase in the management expense rate was mainly due to the combined impact of the dismissal compensation of employees at the new material plant in Bonn, Germany, as well as the increase in expenses for employee remuneration and project consulting services during the reporting period.
The automobile business has been adjusted, and losses are expected to be reduced significantly in the future. The company plans to close its subsidiary's Bonn factory in 2024 and terminate the labor relationship with about 160 employees at the Bonn factory by paying dismissal compensation. 2023Q3 New Materials Germany (Bogo) calculated employee dismissal compensation of 18 million euros (equivalent to 140 million yuan), reducing the company's net profit attributable to shareholders of listed companies by about 90 million yuan.
Investment suggestion: The company is one of the leading wind power blade, line/bridge construction/automobile vibration damping (shock) enterprises. Benefiting from factors such as rising wind power industry prosperity and falling raw material prices, the company's profit is expected to maintain rapid growth. We expect the company's EPS from 2023-2025 to be 0.6/0.9/1.1 yuan/share, corresponding to PE18/12/9 times. Using the PE valuation method, referring to comparable companies, the company was given 15 times PE over 24 years, corresponding to the target price of 13 yuan/share, maintaining the “recommended” rating.
Risk warning: Wind power installations fall short of expectations, overseas market expansion falls short of expectations, localization and substitution of new materials falls short of expectations, raw material prices fluctuate, etc.