Financial performance fell slightly short of market expectations and is expected to recover in 2024. The company achieved revenue of 50.457 billion yuan in 2023, up 8.66% year on year, of which 2023Q4 achieved revenue of 21.138 billion yuan, up 4.26% year on year, up 104.87% month on month; realized net profit of 1,331 billion yuan, down 44.16% year on year. Of these, 2023Q4 achieved net profit to mother of 70 million yuan, up 288.89% year on year and 600% month on month. Overall performance is slightly lower than market expectations. We expect that with fan prices stabilizing, profitability is expected to be repaired in 2024.
The gross margin of fans has rebounded, and the gross margin of the wind farm development business has declined significantly. The company's profitability in the fan sector improved in 2023, and gross margin rebounded 0.18 pct to 6.41%; the gross profit margin of the wind farm development business was 47.30%, down 18.09 pct during the same period, mainly due to a sharp increase in wind farm development costs, which led to a decrease in product profit margin. In terms of fan prices, according to company statistics, the average bid price for wind turbines from wind power manufacturers in 2023 was 1,555 yuan/kW. It has remained stable since September 2023, so we believe that as the trend of large-scale fans accelerates and the price side stabilizes, the gross margin of the fan sector is expected to increase further in 2024.
The number of on-hand orders reached 30.4 GW, and actively promoted the internationalization strategy. The company shipped 13.8 GW of fans in 2023, which is basically the same as the previous year, with fans above 4 MW accounting for 98.9%. The total number of on-hand orders was 30.4 GW, an increase of 12.13% over the previous year, with models over 6MW accounting for 49%.
The company is active in the North American, Oceanian and European markets, and in emerging markets such as Asia, South America and Africa. The overseas order scale is 4677MW, and the equity capacity is 463MW.
The power generation business is developing steadily to calm profit fluctuations. The total installed equity capacity of domestic and foreign self-operated wind farms was 7,289 MW. Domestic and foreign wind power projects added 1,793 MW of net installed capacity; at the same time, 1,568 MW of wind farms were sold, with a capacity of 2,350 MW under construction, of which the northwest region accounted for 47%, East China accounted for 28%, and North China accounted for 25%.
Profit forecast and investment recommendations: Based on the company's orders and product delivery, we expect the company's 2024-2026 revenue to be $567.8/626/67.39 billion yuan, and net profit to mother of $23.9/283/29 billion. According to the DCF model, we lowered the target price from HK$6.44 per share to HK$4.85 per share, maintaining the “better than the market” rating.
Risk warning: 1. Installation and related policies fall short of expectations; 2. Bidding falls short of expectations; 3. Prices of raw materials have risen sharply; 4. Exchange rate risk.