Key points of investment
A rookie of wind power machines, with a net profit CAGR of about 49% in 2018-2022, the company is a rookie of wind power equipment. Its main business is wind power products and operation and maintenance services, power generation revenue, and wind power construction services. In 2022, these businesses accounted for 82%, 5%, and 12% of revenue, respectively. Wind power products and operation and maintenance services mainly include fan sales, operation and maintenance services, and blade sales. Among them, fan sales accounted for 72% of revenue in 2022, which is the company's main source of revenue. In 2018-2022, the company achieved CAGR of revenue and net profit of about 86% and 49% respectively; the company's gross margin remained above 23%, and net profit increased from -32.33% to 13.41%.
The CAGR for new global and domestic installations in 2022-2025 is about 20% or 19%; the competitive pattern of mainframe may be reshaped. Judging from industry space, the wind power industry is booming, and the new installed capacity is expected to exceed expectations during the “14th Five-Year Plan” period.
It is estimated that during the “14th Five-Year Plan” period, global and domestic wind power will increase the annual installed capacity of 109 and 67 GW, with a CAGR of about 20% and 19% for 2022-2025. Judging from the development trend, large-scale fans are the core means to reduce electricity costs, and have become an inevitable choice in the “era of affordability”. In 2020-2022, the average stand-alone capacity of newly installed fans in China ranged from 2.7 MW to 4.5 MW. The trend of offshore wind power is remarkable. It is estimated that the CAGR of the new installed capacity of global and Chinese offshore wind will be about 43% in 2022-2025. Looking at the mainframe sector, the market concentration of machine manufacturers continues to increase. The concentration of the first tier has declined due to the rush to install, and the second tier has ushered in new opportunities. The top ten OEMs in 2018-2022 increased from 90% to 98.6%, and the market share of the top three OEMs fell from 63.9% to 51%. The market share gap of leading OEMs is narrowing, and the growing Sany Heavy Energy has successfully entered the second tier.
Cost, R&D, and industrial chain integration advantages build core competitiveness. The “double sea” strategy opens up room for growth. The company has multiple competitive advantages: 1) Cost advantage: The company's average gross margin in 2018-2022 was about 29%, and its profitability was significantly ahead of its peers. The company's product research and design, production efficiency, and supply chain assurance jointly build cost advantages. 2) R&D advantages: The company continues to strengthen R&D investment and become a leader in domestic “box transformation and installation” technological innovation. 3) Integrated advantages in the industrial chain: The company has a business layout for the entire wind power industry chain, with a comprehensive layout in fan core components, fan products and operation and maintenance services, wind farm design, construction and operation. At the same time, the company has the ability to independently develop and manufacture blades and generators.
The “Double Sea” strategic layout opens up room for growth, and is expected to achieve a similar rise in volume and profit. In terms of offshore wind power, the company announced the official launch of 9MW offshore wind turbines in the first half of 2023, keeping up with industry trends. In terms of overseas markets, the company is actively developing and progressing steadily. In 2022, the company won the bid for a 98MW wind power project in Kazakhstan.
Profit forecast and valuation: The 2023-2025 net profit CAGR is about 24%. The company's net profit for 2023-2025 is expected to be 17.4, 21.8, and 2.66 billion yuan, up 6%, 26%, and 22% year on year, with CAGR = 24%. The current price corresponds to PE 21, 16, 14. Give a “buy” rating.
Risk warning
1) Wind power installations fell short of expectations; 2) raw material prices rose sharply; 3) fan sales prices fell sharply; 4) power project construction fell short of expectations.