Description of the event

The company released its 2023 three-quarter report. The first three quarters of 2023 achieved operating income of about 1.34 billion yuan, an increase of 10% over the previous year, and net profit of 330 million yuan, an increase of 39% over the previous year; of these, 2023Q3 achieved operating income of 540 million yuan, a year-on-year decrease of 6%, a year-on-year increase of about 49%, and net profit of 130 million yuan, an increase of 8% over the previous year, and a year-on-year increase of about 26%.

Incident comments

In terms of 2023Q1-3, the company's Q1-3 revenue increased year over year, achieving gross margin of about 35.5%, an increase of about 7 pct year over year.

The cost rate for the period was about 8.7%, an increase of about 2.6 pct over the previous year, of which the sales expense ratio was about 0.6%, the year-on-year increase of about 0.2 pct, the management expense rate was about 4.9%, and the year-on-year increase of about 1.5 pct. It is expected that management expenses will increase mainly due to the increase in revenue. The R&D expenses rate is about 4.0%, up about 0.7 pct year on year. It is expected that the financial cost rate is about -0.8%, up about 0.3 pct year on year, mainly due to the increase in the company's R&D investment. At the same time, the company obtained investment income of about 600 million yuan, and asset impairment losses and credit impairment losses recovered to 500 million yuan and 0.2 billion yuan respectively. In the end, the company achieved a net interest rate of about 24.5%, an increase of about 5 pct over the previous year.

In the Q3 dimension alone, the company's Q3 revenue declined slightly year on year, up about 49% month on month. It is expected to be mainly due to the month-on-month increase in the company's shipments. The company achieved gross margin of about 35.5%, a year-on-year increase of about 5.6 pct, and a month-on-month decrease of about 1.3 pct. The month-on-month decline in gross margin is expected to be mainly due to a decrease in the operating volume of the Haifeng industry, a low foundry operating rate, and an increase in depreciation at the Dongying base.

The fee rate for the Q3 period was about 8.2%, an increase of about 3.0 pct over the previous year, and a decrease of about 1 pct from month to month. Among them, the increase in the cost ratio in the year-on-year dimension was mainly due to the increase in the sales expense ratio, management expense ratio, and R&D expense ratio. The year-on-year period expense ratio decreased, mainly due to the month-on-month decline in the sales expense ratio, management expense ratio, and financial expense ratio. Let's look at it specifically:

The sales expense ratio was about 0.6%, up about 0.3 pct year on year, down 0.1 pct month on month; management expense ratio was about 4.4%, up 1.2 pct year on year, down 1.2 pct month on month; R&D cost rate was about 4.5%, up about 2 pct year on year, up about 0.3 pct month on month, financial expenses were about -1.3%, down 0.5 pct year on year, down 0.3 pct month on month. At the same time, the company obtained investment income of about 104 million yuan and incurred asset impairment losses of about 01 million yuan, and accrued credit impairment losses of about 210 million yuan. In the end, the company achieved a net interest rate of about 23.5% in Q3, a decrease from the previous month.

According to other financial indicators, the net operating cash flow inflows of 2023Q1-3 and Q3 companies were about 150 million yuan and 0.5 billion yuan respectively, and the operating conditions were stable and good; capital expenses were about 440 million yuan and 120 million yuan respectively. It is estimated that the main reason is that the companies are actively promoting the construction of casting production capacity.

Looking ahead, as wind power is rushing to install by the end of the year and the acceleration of construction of ocean wind projects, the company is expected to achieve a further increase in shipment volume. At the same time, the company actively promotes the development of new sliding bearing products and continues to expand foundry production capacity. The Dongying base is gradually completed and put into operation, which is expected to fully benefit from domestic sea breezes. In addition, the company is actively promoting the certification of foreign suppliers, and is also expected to enter the Vestas and GE supply chains, which in turn will generate more performance growth. Net profit for 2023 and 2024 is estimated to return about 500 million yuan and 660 million yuan respectively, corresponding to PE about 19 and 15 times, respectively. Maintain a “buy” rating.

Risk warning

1. The installed capacity of the wind power industry fell short of expectations;

2. The competitive pattern of the wind power spindle industry has deteriorated.