Key points of investment
Incident: The company released its 23 annual report and 2014 quarterly report. Revenue for 23 was 1,685 billion yuan, an increase of 3.2%; net profit to mother was -88 million yuan, a decrease of 143%. Among them, 23Q4 revenue was 131 million yuan, a decrease of 72%/75%; net profit to mother was 153 million yuan, a decrease of 330%/119% in the same quarter. 24Q1 revenue was 124 million yuan, down 75%/5% from the same period; net profit to mother was 74 million yuan, -10.3%/+148% year-on-year. The gross profit margin in '23 was 9.8%, of which the gross profit margin for 23Q4 was -21.8%, and -28.4pct month-on-month; the gross profit margin for 24Q1 was 5.1%, up 26.9pct. Losses in '23 were mainly due to insufficient phased demand after the rush to buy and an increase in depreciation and amortization after the new production capacity was consolidated.
In '23, tower shipments were about 210,000 tons, an increase of 15% +; 24Q1 shipped 13,000 to 14,000 tons. In '23, we expect the company to ship about 210,000 tons of towers (24-250,000 tons including processing stations), with an increase of 15% +, of which Q4 shipped 10,000 tons+ (including about 40,000 tons). Due to force majeure in Jiangsu and Shandong, progress was slow in '23, and shipments fell short of expectations.
In 24Q1, affected by the off-season of sea breeze installations, we expect the company to ship 13,000 to 14,000 tons of towers. Looking ahead to 24 years, Jiangsu Haifeng has made positive progress. We expect that by the end of the 14th Five-Year Plan period, the company's shipments will increase, and the recovery in scale will also dilute depreciation and boost profitability.
Production capacity continues to expand, and offshore vessels are delivered 24/4 to welcome the high growth of the sea breeze. The company lays out production capacity in coastal provinces and cities such as Jiangsu, Shandong, and Guangdong. Production capacity of Haili Wind Energy, Dongying, and Rushan was basically completed in 23, and production will be put into operation in 24. Furthermore, we expect Qidong Phase I to be put into operation by the end of 24, with a nominal production capacity exceeding 1 million tons by the end of 24. Most of these bases have terminal control, and the cost advantage is obvious. The 5,000-ton offshore vessel “Zhongtian 39,” a joint venture with Zhongtian, was successfully delivered in April, and the business gradually moved to the deep sea. Over the past 24 years, there has been positive progress on the seafreeze approval side in all provinces. We expect 10GW+ of domestic seafreeze installations in 24, an increase of 60% + over the same period. Subsequent production will be put into operation in an orderly manner as the company expands its new base. As the purest sea wind model, the company is expected to fully benefit from the high growth of the industry.
23Q4 depreciation accrued 110 million yuan, and repayment of 58 million yuan began in 24Q1 due to Jiangsu Ocean Wind promotion. The company accrued a total of 184 million yuan in impairment over 23 years (asset impairment 109 million yuan/credit impairment of 74 million yuan), of which 23Q4 accrued 112 million yuan (asset impairment of 84 million yuan/credit impairment of 0.28 million yuan), mainly due to: 1) more projects during the rush period, slow settlement, longer account age, and consequent growth; 2) some Haifeng projects were affected by force majeure, and the finished products could not be shipped. The combination of the two resulted in a large accrual ratio. Due to the restart of the Jiangsu Haifeng project, the 24Q1 company began to receive repayments one after another, and the impairment surged back 58 million yuan. It is expected that it will continue to recover the accrued amount as Jiangsu Haifeng progresses further.
23Q4 & 24Q1 wind farm profits were corrected in 24Q1 due to a decline in revenue and an increase in cost rates. The cost rate for the 23-year period was 6.6%, an increase of 3.3 pct, mainly due to an increase in the company's management resources/R&D investment. The cost rate for the 23Q4/24Q1 period was 24.6%/27.4%, an increase of 19/2.7 pct, mainly due to the increase in the rate due to the low revenue base. The 24Q1 company achieved investment income of 55 million yuan, an increase of 561%. The main reason was that the wind speed conditions of the 24Q1 wind farm were good, and the power generation revenue was corrected.
Investment rating: Taking into account the phased lack of market demand in the post-wave cycle of Haifeng rush, we lowered our profit forecast. We expect net profit to be 6.1/8.4/9.5 billion yuan in 24-26 years (the value was 1.200/1.56 billion yuan before 24-25), +787%/+40%/+12% year-on-year, corresponding to PE 16x/11x/10x. Based on the positive progress made by Jiangsu Haifeng, the company's performance has good potential for growth and maintains a “buy” rating.
Risk warning: Wind power installations and capacity expansion fall short of expectations, power generation falls short of expectations, and industry competition is fierce.