Short-term results are under pressure, and I am optimistic that exports to Europe will accelerate
In '23, the company achieved revenue of 4.325 billion yuan (-15% YoY), net profit to mother of 425 million yuan (-6% YoY), 1Q24 achieved revenue of 463 million yuan (-46% YoY/ -53% QoQ), and net profit of 53 million yuan (-29% YoY/ +212% QoQ). The company's short-term performance is pressured by industry demand and non-operating effects. In the long run, as an excellent domestic pile manufacturer, the company is expected to fully benefit from the rapid growth of global offshore wind power in the next two years. We expect the company's EPS to be 1.30/1.92/2.69 yuan in 2024-2026. Comparatively, Wind agreed that the average PE value in 24 was 10.91. Considering that the company is currently leading the number of overseas pipe pile orders, the company was given 16 times PE in 24 years, with a target price of 20.8 yuan, maintaining the “increase in holdings” rating.
Short-term performance is pressured by multiple factors
The 4Q23 company achieved revenue of 992 million yuan, a decrease of 29%/22%; realized net profit of 0.17 million yuan, a year-on-month decrease of 86%/87%. According to the company's annual report, the main reasons for the decline in Q4 profit were: 1) According to the company's annual report, the total cost of the project was delayed due to factors such as changes in the design plan of an overseas project and the weather at the project site. The total cost of the project increased. The settlement amount of the project was reduced after negotiation. The impact on the company's Q4 net profit was about 91 million yuan; 2) The company's Q4 credit impairment losses amounted to about 91 million yuan; 2) The company's Q4 credit impairment losses amounted to about 91 million yuan; 2) The 250MW wind farm was converted, resulting in depreciation and amortization and related financial expenses totaling about 16 million yuan. At the same time, the company's Q1 revenue and profit also showed a year-on-year downward trend, mainly affected by fewer Q1 project starts. At the same time, the company's Q1 calculation fair value changes and various impairment losses exceeded 10 million yuan.
The company's gross margin increased significantly
The company's overall gross margin increased in '23 due to the acceleration of the “Double Seas” business: 1) Overseas: In '23, the company's export volume increased by 60%, and the share of revenue contributed by export products increased to 40% (up 23 pcts year-on-year); among them, overseas offshore workers shipped nearly 100,000 tons per year, and sales increased by more than 4,000 percent year on year. 2) Sea Wind: In '23, the company's domestic and foreign offshore revenue accounted for more than half, an increase of 17 pcts over the same period last year, surpassing onshore products for the first time. The overseas+ocean wind business developed rapidly. The company's gross profit margin for wind power manufacturing in '23 was 21.36%, +4.64pct compared to the same period last year.
At the same time, 1Q24 achieved a comprehensive gross profit margin of 31.60%, an increase of 12.6/10.72 pcts month-on-month, and a record high gross margin in a single quarter since 2021.
An order of 400,000 tons was added from Germany, which is optimistic that the company will go overseas to Europe to accelerate the year-on-year increase in the company's total European order volume by more than 50% in 2023. According to the order delivery cycle, the company is expected to successively deliver to the United Kingdom, France, Germany and other countries and regions in 2024-2026. At the same time, according to the company's announcement, its subsidiary, Penglai Daikin, signed an agreement with the European Sea Breeze owners to lock in 400,000 tons of seabreeze infrastructure production capacity from now until the end of 2030, while also paying a one-time cost of 14 million euros to lock in production. With the completion of the production capacity of the company's Caofeidian Offshore Plant, the company's production capacity is expected to expand further, supporting its increase in the European market share.
Risk warning: The growth rate of new wind power installations is lower than expected, tower price competition is fierce, gross margin is falling risk, and overseas business profits fall short of expectations.