Core views

2024Q1's net profit surged 285.87% year on year. Following the 2023 annual report, the performance growth rate once again exceeded market expectations; the company's revenue recognition progressed steadily, and the optimization of sales expenses and R&D expenses led to a significant year-on-year increase in net interest rates. From January to January 2024, the growth rate of new domestic wind power installations was 49.04%, and wind power tenders remained high in 2023, supporting the demand for wind power lifting equipment in 2024. Looking ahead, while deepening its existing business, the company will vigorously expand new products, new fields, and new markets, which is expected to significantly broaden the business ceiling.

occurrences

In the first quarter of 2024, the company achieved revenue of 241 million yuan, +37.24% year over year; net profit to mother of 583.8829 million yuan, +285.87% year over year; net profit after deducting non-return to mother of 51.9945 million yuan, +349.93% year over year.

Brief review

1. 2024Q1 revenue continued to grow at a high rate, and profit increased nearly 3 times

From January to January 2024, a total of 15.50 GW was added to domestic wind power, an increase of 49.04% over the previous year, continuing the rapid growth trend. According to the China Wind Energy Professional Committee (CWEA) forecast in January 2024, the new installed capacity will reach 75-85 GW in 2024, which is expected to be a further increase compared to 2023; wind power tenders will reach 86.3 GW in 2023, which is expected to support the growth of new installed capacity in 2024.

China International Joint's revenue for the 23Q1-24Q1 quarter was 1.75, 2.66, 2.58, 4.05, and 241 million yuan, respectively, -1.93%, +45.64%, +28.81%, +70.48%, and +37.24%, respectively. The sharp increase in revenue growth in 2023Q4 marks an acceleration in the company's revenue recognition pace; 2024Q1 revenue continued to grow at a high rate, and the revenue amount reached a record high during the same period, supporting the volume of business throughout the year.

With rapid release on the revenue side, combined with control on the expense side, the company's net profit for 2024Q1 increased 285.87% year-on-year to 58.3829 million yuan. Both the amount and growth rate hit record highs in the same period.

2. Expense investment has stabilized, and the net interest rate increased sharply year on year 2024Q1. The company's comprehensive gross margin was 1.96pct to 46.56% year on year. It is expected that the trend of cost reduction in the domestic wind power industry chain is still obvious; as the company releases high value-added products such as heavy loads, rack and pinion lifts, and the steady increase in the share of overseas revenue, the company's gross margin is expected to rise steadily.

The 2024Q1 company's expense ratio declined significantly year-on-year to 18.59pct to 22.45%. Among them, sales, management, R&D, and finance expenses changed year-on-year at -8.75pct, -1.55pct, -6.19pct, 2.10pct to 10.73%, 8.44%, 6.06%, and -2.78%, respectively. In the first quarter of 2023, the company was at the peak of R&D investment and market development for non-wind power products. With the initial results of new business development, the R&D cost rate and sales expense ratio declined significantly year-on-year in 2024Q1, thus returning the cost rate for the period to a reasonable level. The 2024Q1 net margin increased significantly by 15.64pct to 24.27% year over year, and 2.48pct higher than 2023Q4. Looking ahead to 2024, the company's expense investment will gradually enter a stable period, and the net interest rate level is expected to remain high.

3. Vigorously expand new products, new fields and new markets, and broaden the business ceiling 1) Wind power sector: The company has a leading edge in the field of wind power tower lifting equipment, and creates overall solutions for customers through safety protection equipment and service businesses, and its voice is gradually being consolidated. As the growth rate of offshore wind power increases and the trend of large-scale fans becomes more obvious, the company has stepped up research and development efforts on heavy-duty elevators and rack and pinion elevators to realize the application of new scenarios under new technologies such as flexible towers, hybrid towers, and floating fans. 2) Non-wind power sector: The company has successively developed new products such as industrial lifts, tower climbers, and ladder-guided material conveyors and introduced them to the market, expanding new application fields such as power grid towers, cultivating new performance growth points for the company's future continuous development. The share of non-wind power revenue surpassed 1% for the first time in 2023, and the future prospects are promising.

Overseas market development: In March 2024, the company plans to establish a wholly-owned second-tier subsidiary in Brazil through Zhongji Hong Kong, with a total investment of 5 million US dollars; Mid-Level Hong Kong also has overseas subsidiaries such as Mid-Europe, Intermediate-India, Intermediate-Japan, and Intermediate-American Engineering. On the one hand, the company vigorously promotes overseas certification of products, and on the other hand, establishes subsidiaries to cover overseas markets with a localized layout. In 2023, the company's overseas revenue accounted for 49.50% of the main revenue, leading the domestic gross margin; with the development of overseas markets, the company's overseas revenue contribution is expected to increase further.

Investment advice: We expect the company to achieve revenue of 1,470, 17.91, and 2,234 billion yuan respectively in 2024-2026, and net profit to mother of 2.81, 3.46, and 439 million yuan, respectively, +35.70%, +23.16%, and +27.03% year-on-year, respectively. The corresponding dynamic PE for 2024-2026 is 21.88, 17.76, and 13.98 times, respectively, to maintain the “buy” rating.