Core views

The pace of revenue recognition for 2023Q4 has accelerated, and the performance growth rate has greatly exceeded market expectations. Domestic wind power tenders remained high in 2023, supporting industry demand in 2024, and back-end links such as tower lifts have clearly benefited. The company continues to expand overseas markets, and its overseas revenue contribution in 2023 is close to 50%, significantly hedging the decline in gross margin due to cost reduction in the domestic industrial chain; in addition, the non-wind power business accounts for more than 1% of revenue for the first time, and the market prospects are broad. Looking ahead to 2024, the company's expenses are expected to enter a stable investment period, with upward elasticity on the net margin side.

occurrences

The company released its 2023 annual report, achieving revenue of 1.05 billion yuan, +38.17% year over year; net profit to mother of 207 million yuan, +33.33% year over year; net profit without return to mother of 176 million yuan, +38.00% year over year. Revenue for the fourth quarter of 2023 was 405 million yuan, +70.48% year over year; net profit to mother was 88,2938 million yuan, +281.28% year over year; net profit after deducting non-return to mother was 73.0755 million yuan, +358.16% year over year.

Brief review

1. 2023Q4 revenue increased dramatically, and the growth rate of overseas business was impressive throughout the year. Domestic wind power installations continued to grow at a high level in 2023, wind power tenders continued to be high, and industry demand was in a high boom range. In terms of bidding, wind power tenders reached 98.5 GW and 86.3 GW respectively in 2022 and 2023, which remained high for 2 consecutive years, with sufficient demand space. In terms of installed capacity, domestic wind power added 75.66 GW of grid-connected installed capacity in 2023, an increase of 101.06% over the previous year. There is still potential room for improvement compared to the tender volume for the full year of 2022. It is expected that the portion tendered in 2022 but not yet installed in 2023 will continue to support the installed capacity demand in 2024.

Zhongji United 23Q1-23Q4's revenue in a single quarter was 1.75, 2.66, 2.58, and 405 million yuan, respectively, -1.93%, +45.64%, +28.81%, and +70.48% year-on-year; the growth rate increased sharply in the fourth quarter, gradually approaching the overall high growth trend of the wind power industry, marking an acceleration in the pace of the company's revenue recognition and supporting the planned volume of future business.

1) By product: In 2023, lift equipment revenue was +40.34% to 763 million yuan, accounting for a year-on-year increase of 1.14 pct to 69.67% of main business revenue; under the trend of large-scale wind power equipment, the average price of lifting equipment increased 27.96% year-on-year to 311,000 yuan/set. In 2023, protective equipment revenue was +48.47% to 287 million yuan, accounting for a year-on-year increase of 1.84 pct to 26.19% of main business revenue; operation service revenue was -19.64% to 45.424 million yuan, accounting for a decrease of 2.98 pct to 4.15%.

2) By sector: In 2023, the company's wind power industry revenue increased 36.73% year on year to 1,083 billion yuan, accounting for 98.81% of the main business revenue; the non-wind power industry (thermal power, power grid, animal husbandry and construction, etc.) achieved a major breakthrough. Revenue increased 6.07 times year on year to 12.9967 million yuan, accounting for 1.19% of the main business revenue, breaking 1% for the first time. 3) Market by market: In 2023, the company further increased its overseas market development efforts. Overseas revenue increased 73.55% to 542 million yuan year-on-year, accounting for 10.13pct to 49.50% year-on-year.

2. The sharp increase in overseas revenue is hedging the decline in domestic gross margin. Expense investment is expected to stabilize in 2023, and the gross margin of the company's overseas business will increase by 4.36 pct to 60.03% year on year, and the domestic gross margin will drop by 3.31 pcts to 31.92% year on year. We expect the company's market share advantage in the overseas stock installation market and cost reduction in the domestic wind power industry chain to widen the gross margin gap at home and abroad. The increase in the share of overseas revenue in 2023 hedged the decline in domestic gross margin, and the company's comprehensive gross margin increased 2.46pct year-on-year to 46.13%.

The cost ratio increased 1.62 pct to 27.89% year over year during 2023, with sales expenses ratio -0.32 pct to 13.60% year over year, management expenses ratio +0.88 pct to 8.65% year over year, and R&D expenses ratio -0.42 pct to 8.57% year over year. In recent years, the company's new product development and market development have led to significant cost increases. The results of market development and new product introduction in 2023 are obvious, and the scale effect is gradually showing. The net interest rate in 2023 was -0.68pct to 18.73% year on year, and the decline gradually narrowed. Looking ahead to 2024, various expense investments are expected to enter a period of steady growth, and the net margin side is expected to usher in upward elasticity under the premise that demand is fully released.

3. Vigorously expand new products and fields, and broaden the business ceiling 1) Wind power sector: The company has a leading edge in the field of wind power tower lifting equipment, and has built overall solutions for customers through safety protection equipment and service business, and its voice is gradually being consolidated. As the growth rate of offshore wind power increases and the trend of large-scale fans becomes more obvious, the company has stepped up research and development efforts on heavy-duty elevators and rack and pinion elevators to realize the application of new scenarios under new technologies such as flexible towers, hybrid towers, and floating fans. 2) Non-wind power sector: The company has successively developed new products such as industrial lifts, tower climbers, and ladder-guided material conveyors and introduced them to the market, expanding new application fields such as power grid towers, cultivating new performance growth points for the company's future continuous development. The share of non-wind power revenue surpassed 1% for the first time in 2023, and the future prospects are promising.

Investment advice: We expect the company to achieve revenue of 1,470, 17.91, and 2,234 billion yuan respectively in 2024-2026, and net profit to mother of 2.70, 3.35, and 417 million yuan, respectively, +30.30%, +24.13%, and +24.68% year-on-year, respectively. Corresponding to the 2024-2026 dynamic PE, 22.13, 17.83, and 14.30 times, respectively, to maintain the “buy” rating.

Risk analysis

1) Wind power installed growth rate falls short of expectations

Downstream high-altitude safety lifting equipment is mainly used in wind power towers, so the installed growth rate of wind power will directly affect the demand for this type of wind power equipment. Currently, domestic wind power tenders are growing rapidly, and wind power installations are expected to gradually increase. However, if the actual growth rate of installed capacity is significantly lower than the growth rate of tenders in the previous year, the growth rate of demand for wind power equipment will be lower than expected, which will affect the company's revenue volume.

2) New business development progress falls short of expectations

The company's non-wind power business has been developing smoothly in recent years, helping the company's long-term development. However, if business development for new application scenarios such as power grid towers does not progress smoothly, making products such as tower climbers and industrial elevators unable to be deployed quickly, it will affect the company's long-term performance growth potential.