Key points of investment
Incident: The company released its annual report for the year 23 and the quarterly report for '24, with revenue of 4.3 billion yuan, -15% year on year; net profit to mother of 430 million yuan, -5.6% year on year; gross profit margin of 23%, +7 pct year on year. Among them, 23Q4 revenue was 1 billion yuan, -29%/22% YoY; net profit to mother was 0.2 billion yuan, -86%/97% YoY; and gross profit margin was 21%, +4.1pct YoY. 24Q1 revenue was 460 million yuan, -46%/53% YoY; net profit to mother was 53 million yuan, -29% /+uio' 212% YoY. The 23-year results fell short of expectations: 1) the impact on Q4 net profit of about 91 million yuan due to a change in the design plan of an overseas project; 2) the total depreciation and amortization and related financial expenses resulting from the transformation of the Q4 Changwu wind farm was about 16 million yuan; 3) the impact on exchange was about 0.3 billion yuan. After deducting the above effects, the 23-year results are in line with expectations.
Export tower volume and gross margin increased 5.7pct in '23, and overseas orders continued to break through. Tower sales in '23 were 508,000 tons (about 130,000 tons in Q4), down 14% (down about 7%), with a gross profit margin of 20.8%, and an increase of 5.7pct. The increase in gross margin was mainly due to a 60% increase in export volume in '23 (of which nearly 100,000 tons were shipped from overseas offshore industries). In '23, the company achieved a 0-1 breakthrough in overseas single pile delivery, helping export business revenue of 1.71 billion yuan, increasing 105%, accounting for 40% of the business and 23pct; the gross export margin was 27.2%, higher than the domestic market share of 21.0%, and the share of export business grew continuously to optimize profits. In 24Q1, we expect the company to ship nearly 50,000 tons, of which exports to offshore industries will also increase by 20%. The company continues to receive recognition from overseas customers. The number of export orders in '23 increased by 50% + compared to '22. In April, it was announced that it had signed 400,000 tons of locked production orders with European Sea Breeze developers, receiving a one-time production lock fee of 14 million euros, which will be distributed to the project later. The company is working on more than 3 million tons of projects in Europe, America, Japan, South Korea, etc., and it is expected that it will continue to receive orders in the future.
Production capacity continues to expand, a global logistics system is built, and “production, sales and transportation” of exported offshore workers is integrated. The company continues to expand offshore production capacity. Tangshan Offshore's 500,000 ton factory company is expected to be put into operation in March '25; in order to meet the global strategic layout, the company independently designs and builds its own seabreeze tower carriers. It is expected to deliver 2 ships in 25 and form a fleet of 10 ships in 2030 to help the company build a global logistics system and enhance future export seabreeze delivery+ profitability.
Generating revenue of $132 million in '23, gross profit margin of 89.7%, and plans to build 250 MW of new PV in '24. In '23, the company's Zhangwu 250MW land wind was connected to the 23H1 grid, generating 400 million kilowatts, contributing 132 million yuan in power generation revenue, and achieving a 0-1 wind farm. In '24, the company plans to start building a 250MW fish-light complementary photovoltaic in the middle of the year, and strive to be connected to the grid within the year. The company continues to develop new energy power generation projects. The total number of new energy projects included in Hebei is 1 GW, which is expected to continue to increase revenue and create stable economic benefits for the company.
23Q4 net operating cash flow of 800 million yuan, balance ratio of 32%, excellent asset structure, and increased number of orders contributed to contract liabilities. The cost rate for the 23Q4 period was 20%, with an increase of 8.3/8.3 pct in R&D expenses, mainly due to a 6.3pct increase in R&D expenses; the 24Q1 company's net operating cash flow of 800 million yuan, an increase of 450% +; the end of 24Q1 inventory was 1.87 billion yuan, an increase of 21%; the 24Q1 contract debt increased 68%, and the company continued to receive overseas orders and an increase in advance payments.
Profit forecast and investment advice: Considering that domestic ocean wind progress falls short of expectations, we lowered our profit forecast. We expect net profit to be 6.5/8.9/1.2 billion yuan in 24-26 (the value was 11.9/1.70 billion yuan 24-25 years ago), an increase of 54/36/ 35% over the same period, corresponding to PE 19/14/10x.
Based on the continuous positive progress of the company's high-quality overseas orders, the performance has good potential for growth and maintains a “buy” rating.
Risk warning: increased competition, falling short of expectations, changes in the international trade environment.