Matters:
The company released its 2023 annual report, achieving revenue of RMB 50.457 billion, a year-on-year increase of 8.66%, net profit of RMB 1,331 billion, a year-on-year decrease of 44.16%, net profit after deduction of 1.285 billion yuan, a year-on-year decrease of 35.32%, EPS of 0.32 yuan, and plans to distribute a cash dividend of 1.0 yuan (tax included) for every 10 shares. 2023Q4 achieved revenue of 21.138 billion yuan, a year-on-year increase of 4.26%, and net profit to mother of 70 million yuan, an increase of 277.61% year-on-year.
Ping An's point of view:
Factors such as taxes and impairment contributed to a decline in 2023 results. In 2023, the company's main business developed steadily and positively as a whole. The decline in net profit to the mother was related to the increase in R&D expenses and asset/credit impairment. Furthermore, the sharp increase in income tax expenses had a great impact on current results. Specifically, in terms of various segments: fan business revenue and gross margin stabilized in 2023, but the gross margin level was still at a historically low level, and it is estimated that it will still bear large losses; wind farm power generation business revenue declined slightly due to the decline in feed-in electricity prices, but the scale of wind farm transfers and corresponding revenue increased dramatically; the wind power service business was generally stable.
Looking forward to the future, the wind farm and wind power service business are expected to continue the steady and rapid development trend. How to reduce costs and reduce/reverse losses in the fan business is the core focus of the company's future development.
The gross margin of the fan business showed signs of a steady recovery, and the volume of orders in hand continued to rise. In 2023, the company's fan export sales volume was 13.77 GW, which was basically the same as the previous year. The fan and parts business revenue was 32.94 billion yuan, up 1.03% year on year, and the gross profit margin was 6.41%, up 0.18 percentage points year on year. The gross profit margin of the fan and parts business in the first half of 2023 was 3.64%, and it is estimated to increase to 8.16% in the second half of the year. With the fan price trend declining, the company's gross margin situation in the second half of 2023 was better than expected. Looking ahead to 2024, the average sales price of the fan business is likely to continue to decline. It is estimated that the purchase price of parts will also decline, and the gross margin level can be expected to continue to rise. In 2023, the company released the GWHV17 platform. Using a platform-based modular design, it will become the company's next generation of main onshore delivery products in the future, and is also expected to further reduce the cost side. By the end of 2023, the company's orders for hand fans were about 29.8 GW, an increase of about 12% over the previous year, of which the overseas order volume was about 4.7 GW; it is estimated that the net new order volume in 2023 was about 17 GW, a year-on-year decrease.
The scale of power plant transfers and transactions increased dramatically, and the post-service business grew steadily. In 2023, the company added 1.79 GW of equity grid-connected installed capacity of 1.79 GW, which was basically the same as the previous year. The transfer of equity grid-connected capacity was 822.34 MW (corresponding investment income was 1,724 billion yuan, up 54.07% year on year), and the transaction scale of power plant products exceeded 740 MW; by the end of 2023, the total net installed capacity of the global equity grid was 7.29 GW, an increase of 0.21 GW over the previous year. The equity wind farm capacity was 2.35 GW. Since 2023, the company's newly approved domestic new energy projects are about 6.29 GW, an increase of about 60% over the previous year. The company has successfully obtained several offshore wind power projects in East China, including Pingyang No. 1 and Ruian No. 2, and has obtained large-scale offshore resource reserves and plans in North China, achieving rapid growth in offshore resource acquisition. In 2023, the company's wind power generation revenue was 6.431 billion yuan, a slight year-on-year decline, mainly due to the average feed-in price of domestic wind power projects falling by about 10%; the company's revenue from power plant products was nearly 4.5 billion yuan, and the gross margin of the business is estimated to be over 20%. In terms of wind power services, the revenue scale in 2023 was 5.24 billion yuan, with a gross profit margin of 19.8%, all declining year on year, but the post-service business continued to grow. After 2023, service revenue was 3.03 billion yuan, an increase of 22.91% year on year.
Investment advice. Considering that the gross margin of the fan business was better than expected, the company's profit forecast was adjusted. The estimated net profit for 2024-2025 was 25.11 billion yuan or 3.362 billion yuan (the original forecast values were 20.11 billion yuan and 3.268 billion yuan), adding a forecast value of 4.211 billion yuan for 2026, which is 12.7, 9.5, and 7.6 times the corresponding dynamic PE. The company's fan scale advantage is still obvious, and the wind farm and other businesses are developing. In the future, it is expected that more measures will reduce costs to enhance the competitiveness of the fan business and maintain the company's “recommended” rating.
Risk warning. (1) Domestic and foreign wind power demand falls short of expectations. (2) The risk of increased protection of overseas trade. (3) Risk of further intensification of competition in the fan industry and lower profit levels than expected.