FY2023 and 1Q24 results are in line with market expectations
The company announced FY2023 and 1Q24 results: the company's revenue in 2023 was 1.69 billion yuan, up 3.2% year on year; net profit loss to mother was 88 million yuan, which changed from profit to loss year on year, falling at the lower end of the previous performance forecast. 1Q24's revenue was 124 million yuan, down 75.2% year on year, and net profit to mother was 74 million yuan, down 10.3% year on year. The company's FY2023 and 1Q24 results met market expectations.
The company lost money for multiple reasons in 2023. In 2023, the company shipped about 249,000 tons of Haifeng products, an increase of 37.6% over the previous year, and maintained a steady market share as the installed capacity of the industry increased.
However, due to the recovery in industry demand in 2023 still far short of expectations, combined with the company's low capacity utilization rate and the failure of some outsourced products to contribute to profits, the company's comprehensive gross margin dropped by about 5ppt to 9.8%. At the same time, investment income from the power plant business in which the company is a shareholder also showed a significant year-on-year decline due to factors such as poor wind speed.
In addition, due to the slow repayment of electricity price subsidies from downstream customers rushing for early installation, the company's accounts receivable and contract assets also made significant bad debt provisions under accounting standards, resulting in a cumulative total of 196 million yuan in asset and credit impairment losses. The above multiple reasons combined to cause the company to lose money in 2023.
Revenue from 1Q24 has not recovered, and the return of profits and bad debts from participating power plants is relatively good. Due to the low season in the industry, 1Q24 company revenue was still very low. However, the company's shareholding in power plants increased sharply year on year, driving 1Q24 investment income to reach 55 million yuan, an increase of 241.0% year on year. Furthermore, the bad debt impairment previously calculated by the company had already recovered in 1Q24, and the performance was relatively good.
Development trends
The low point in the industry is about to pass, and it is expected that the shipping acceleration cycle will begin in mid-2024. The construction progress of several regional projects in the early stages, such as Jiangsu and Yangjiang in Guangdong, fell short of expectations. We have observed that projects in these regions are actively undergoing preparation procedures before construction. We expect the seabreeze industry to reach 15-20 GW by the second half of 2024, showing a strong recovery from the sluggish state of actual prosperity in 2022 to 2023. We believe that the company is expected to enter the shipping acceleration cycle starting in mid-2024 and meet the subsequent recovery in industry demand with a good production capacity layout. Furthermore, we expect the company's power plant business to return to normal throughout the year, which is expected to contribute significantly to investment income. The depreciation previously calculated is also expected to gradually wash back into bad debts as the previous national subsidy program gradually enters the subsidy catalogue.
Profit forecasting and valuation
As industry demand recovery is still slower than previously anticipated, we lowered the company's 2024 net profit forecast by 15.4% to 550 million yuan, keeping the 2025 net profit forecast unchanged. The company's current stock price corresponds to 17.4 and 12.2 times the price-earnings ratio for 2024 and 2025. We are optimistic about the company's competitiveness in Haifeng products as industry demand increases in the future, and maintain the company's performance rating and target price of 60.0 yuan, corresponding to 23.7 and 16.6 times price-earnings ratios in 2024 and 2025, with 36.5% room for growth compared to the current stock price.
risks
The progress of offshore wind power fell short of expectations; increased competition in the industry affected profits; and the risk of impairment was calculated.