Forecast a loss of 0.68—89 billion yuan in 2023
The company announced its 2023 performance forecast: The company expects a net profit loss of 0.68 to 089 million yuan in 2023, compared with a profit of 205 million yuan for the same period in 2022. The company's 2023 performance forecast is in line with market expectations. 4Q23 continued to lose 3Q23 mainly due to 4Q23's calculation of impairment provisions for various types of assets totaling about 124 million yuan.
In 2023, the company's manufacturing business had poor shipments and profit margins. The power plant business performance continued to be sluggish, and poor repayment calculated significant depreciation. We expect the company to ship about 250,000 tons of basic products for wind power towers and sea wind fans in 2023. The performance in 4 of these quarters was relatively average (slightly weak in 4Q). Overall, it was greatly affected by the poor start of downstream projects in the industry. In particular, the sea breeze project in the Jiangsu region, which has not started construction in 2023. At the same time, profit margins also declined as competition intensified due to poor demand in the industry and the transportation of the company's products to markets outside of Jiangsu. Investment income from the power plant business in which the company is a shareholder also showed a significant year-on-year decline due to factors such as poor wind speed. In addition, due to the slow repayment of electricity price subsidies from downstream customers rushing for early installation, the company's accounts receivable and contract assets also made significant bad debt provisions under accounting standards, resulting in cumulative asset and credit impairment losses amounting to 196 million yuan. The above factors combined to cause the company to lose money in 2023.
Key points of interest
2024 ushered in a sea breeze tender and the scale under construction began. The second half of 2024 is likely to enter a booming state, and the company's perfect production capacity layout is expected to gradually reap results. Earlier, the construction progress of key regional projects, such as Jiangsu and Yangjiang in Guangdong, fell short of expectations. We have observed that projects in these regions are actively undergoing preparation procedures before commencement. We expect the seabreeze industry to be tendered in 2024, and the scale of the seabreeze project under construction is expected to reach 15-20 GW by the second half of 2024, showing a strong recovery from the sluggish state of actual construction in 2022 to 2023. Haili Wind Power has planned production capacity in many parts of the country to continuously enhance its market competitiveness in multiple regions. We believe that the company is expected to benefit from the successive commencement of local projects in 2024, especially in the Jiangsu region.
Profit forecasting and valuation
Considering that the company continued to accrue depreciation of various assets of about 124 million yuan in 4Q23 and shipments were slightly lower than previously anticipated, we lowered the company's 2023 net profit forecast to a loss of 79 million yuan. At the same time, considering that the industry's profit per ton of basic products for sea wind towers and fans is still weak, we lowered the company's 2024-2025 net profit forecast by 9.3% and 6.5% to 650 and 786 million yuan. The company's current stock price corresponds to 15.8 and 13.0 times the price-earnings ratio in 2024 and 2024. To keep the company outperforming the industry rating, we are optimistic that the company is expected to benefit from the subsequent rise in the sea breeze industry with its high-quality production capacity layout. Due to lowering the 2024 profit forecast and declining industry valuation level, we lowered the company's target price by 20.4% to 60.0 yuan, which corresponds to a price-earnings ratio of 20.1 times in 2024, with 27.3% upside compared to the current stock price.
risks
The progress of offshore wind power fell short of expectations; increased competition in the industry affected profits; and the risk of impairment was calculated.