Description of the event
The company released its three-quarter report for 2023. In the first three quarters of 2023, it achieved revenue of about 1.55 billion yuan, a year-on-year increase of 33%, and net profit to mother of 0.7 billion yuan, a year-on-year decrease of 73%; of these, 2023Q3 achieved operating income of 520 million yuan, a year-on-year decrease of 0.7%, and net profit to mother of -70 million yuan, a year-on-year decrease of 239%.
Incident comments
On the revenue side, the company's 2023Q3 revenue declined slightly year-on-year, with a month-on-month decline of about 4%. It is expected that the industry's shipping volume and processing costs will drop mainly due to delays in the start of the Sea Breeze project.
On the profit side, the company's gross margin for 2023Q3 was about 6.6%, down about 10.4 pcts year on year and 8.6 pct month on month. It is expected that manufacturing costs will increase mainly due to the phased decline in industry shipments and processing costs due to the decline in seabreeze construction, compounded by the increase in the company's fixed asset transformation. The cost rate for the period was about 6%, up 2.6 pct year on year, up about 1 pct from month to month, and the sales expense ratio decreased by 0.2 pct year on year, and remained basically flat from month to month. The management cost ratio, R&D cost rate, and financial cost ratio increased by 1.4 pct, 0.8 pct, and 0.6 pct, respectively, and increased by about 0.5 pct, 0.3 pct, and 0.2 pct, respectively. At the same time, Q3 was affected by low wind volume in Jiangsu, and the wind farm lost a bit. The company incurred asset impairment losses of about 0.23 million yuan, and accrued credit impairment of about 51 million yuan (it is estimated that settlement delays were due mainly to high accounts receivable before the rush to buy in '21, compounded by the slow progress of Jiangsu Haifeng in '22). Ultimately, the company's net interest rate was negative.
In terms of other financial indicators, the company's 2023Q3 net operating cash flow outflow was about 100 million yuan, an improvement over the previous month, and capital expenditure was about 260 million yuan. It is expected that the company is mainly actively developing production capacity.
Looking ahead, as the pace of demand for the Shandong Haifeng project accelerates at the end of the year, the company is expected to achieve a significant month-on-month recovery in shipments. At the same time, we believe that the installed capacity of the sea breeze is expected to reach the level of 10 GW in 2024, achieving a nearly double increase of 5-6 GW compared to 2023, and that processing costs for tower pipe piles are also expected to improve. The company is actively promoting the construction of Seabreeze production capacity (production capacity is expected to reach 1.1 million tons next year), and the adjustment of the impairment accrual policy next year is expected to increase profits as the Seabreeze project rolls on a rolling basis. The company's net profit for 2023 and 2024 is estimated to be about 165 million yuan and 740 million yuan, respectively, corresponding to PE, about 75 and 17 times, respectively. Maintain a “buy” rating.
Risk warning
1. The development speed of the sea breeze industry falls short of expectations;
2. Profitability falls short of expectations due to increased competition in the industry.