Incident: Sino-International jointly released the 2023 Annual Report. The company's annual revenue was 1.05 billion yuan, up 38% year on year, achieving net profit of 210 million yuan, up 33% year on year; fourth quarter revenue of 405 million, up 70% year on year, achieving net profit of 88 million yuan, up 281% year on year.

The basic wind power market is stable, diversified products, and market expansion performance is impressive: according to data from the China Energy Administration, China added about 76 GW of installed wind power in 2023, an increase of 102% over the previous year; according to Bloomberg New Energy financial data, global wind power added 118 GW of installed capacity in 2023, +36% year-on-year. The company's outstanding performance throughout the year has benefited from the development of the industry, and on the other hand, its diversified expansion contributed to good growth momentum. Specifically, let's take a look at the company's performance in 2023:

(1) By industry: The wind power industry's revenue was 1,083 billion yuan, up 36.73% year on year; other industries were 12.3 million yuan, up 606.97% year on year. The company actively develops new products and develops markets in other industries, and has launched new products in the fields of industrial and construction lifting equipment and intelligent safety protection equipment.

(2) By product: High-altitude safety lifting equipment revenue was 763 million yuan, up 40.34% year on year; high-altitude safety protection equipment revenue was 287 million yuan, up 48.47% year on year; equipment sales directly contributed 95% of the company's revenue.

(3) Subregions: Domestic market revenue of 553 million, accounting for 50.9%, up 14.99% year on year, and overseas market revenue of 542 million yuan, accounting for 49.1%, up 60.03% year on year. Overseas growth continued to be high, with a CAGR of 90% in 2020-2023.

The gross margin has increased steadily, and the profit level is expected to improve in 2024:2023 gross profit margin of 46.13%, +2.46pcts year on year; net profit margin 18.73%, -0.68pcts year on year. Thanks to the increase in the share of high-margin overseas markets (60% overseas gross profit margin and 32.7% domestic gross profit margin in 2023), gross margin increased steadily, while the overall profit level was pressured mainly by cost increases due to new business expansion. In terms of cost ratio, the company's expense ratio for the 2023 period was 27.88%, +1.61 pct year on year. Among them, sales, management, R&D, and finance expenses rates were -0.33pct, +0.88pct, -0.42pct, and +1.48pct, respectively. Looking ahead to 2024, the company plans to gradually rise to the previous net interest rate level (the company's net interest rate remained above 25% in 2019-2021) through continuous technical reform and cost reduction and fee control, combined with large-scale revenue effects.

Demand for wind power at home and abroad is expected to rise steadily, and the company's active diversified layout is expected to fully demonstrate alpha attributes: according to CWEA estimates, in 2024-2025, China's new installed capacity may not be less than 75 or 85 GW, and is expected to exceed 200 GW by 2030; according to GWEC forecasts, in 2023-2027, the world's new wind power installations are expected to remain above 100 GW, and the annual CAGR will reach 15%. From the company's perspective, the company has achieved full customer coverage of all domestic fan manufacturers and the five major power groups, and is expected to fully benefit from future growth in domestic and overseas demand. This alpha is reflected in: ① diversified markets: after customer coverage has been achieved, overseas stock market updates and increased market share contribute incremental flexibility; ② diversified products: dual-engine linkage solutions in the wind power sector, heavy-duty lifts, and rack and pinion elevators; ③ diversified fields: industrial/construction tower cranes can be used in power towers, tower cranes, three-dimensional warehouses, etc., and material conveyors can be used in fields such as photovoltaic installation, logistics and moving.

Investment advice:

We expect the company's revenue for 2024-2026 to be 1.44 billion yuan, 1.79 billion yuan and 2.23 billion yuan respectively, with growth rates of 30.7%, 23.8% and 24.9%, respectively, and net profit of 2.7, 3.4, and 460 million yuan respectively, with growth rates of 30.1%, 27.9%, and 35.1% respectively. Growth is outstanding, and profit levels are expected to gradually improve. A buy-A investment rating is given. The target price for 6 months is 47.79 yuan, which is equivalent to a dynamic price-earnings ratio of 27X in 2024.

Risk warning: The prosperity of the downstream wind power industry fluctuates; overseas market development is blocked; expansion of new products and new fields is blocked; increased market competition affects gross profit margins; upfront investment in business layout greatly affects short-term profit levels.