Key points of investment
Incident: The company released its 2023 annual report and 2024 quarterly report. The company's 2023 revenue was 27.86 billion yuan, down 9.4%; net profit to mother was 372 million yuan, down 89.2%; of which 23Q4 revenue was 6.90 billion yuan, down 24%/34%; net profit to mother -860 million yuan, -611%/-249% year on month; 24Q1 revenue of 5.08 billion yuan, +85%/-26% year on month, net profit to mother of 304 million yuan, positive year-on-month, gross profit margin increased 20.7.3%/ 23.4 pct
Fans are expected to be shipped 15 GW in '24, an increase of 35% +. Of these, Haifeng will ship 4-5 GW, which is expected to enhance profit resilience! In 2023, about 9.7 GW of fans were shipped, +33%, of which 3 GW of sea wind was +35%, and Q4 fans sold 2.8 GW, of which 1 GW of sea wind, with a drop of 30%. Sea breeze shipments fell slightly short of expectations, mainly due to delays in shipment. The gross profit margin for fans and accessories in 2023 was 6.4%, down 11.4pct. 24Q1 is expected to ship 1.4-1.5GW, an increase of 50% + over the same period. At the end of the 14th Five-Year Plan period, 2024 is expected to be a big year for sea breeze tenders. Combined with Q2 entering the peak season, the company's fan delivery is expected to increase quarterly. It is expected that the annual shipment will be about 15 GW (including 4-5 GW of which the sea breeze accounts for about 30%). The increase in the share of sea breeze is expected to enhance profit resilience!
23Q4 The transfer of some power plants was postponed, and it is expected that 3GW+ will be transferred in 24 years. In 23, we expect the company to transfer about 0.5-0.6 GW of power plants, which is basically the same as the previous year, and the transfer falls short of expectations. The main reason is that some power plants were delayed due to objective reasons for the target of the transaction. We expect the 24Q1 company to transfer about 200MW of power plants, and Q2 is expected to continue to deliver the remaining 23 years of deferred projects. By the end of 2023, the company's capacity under construction reached 3.3 GW (2.15 GW in '22) and 2.56 GW of operating capacity (1.5 GW in '22). We expect the company to transfer 3GW+ power plants in '24, and sufficient capacity under construction will help to continue to achieve transfer benefits.
In 23 years, there was a depreciation of 690 million yuan, and operating cash flow was under pressure. The cost rate for the 2023 period was 10.9%, with an increase of 1.8 pct. Among them, the cost rate for Q4 was 11.3%, and the same period increased by 5.0/2.3 pct. The cost rate during the 24Q1 period was 16.1%, -7.5/+4.8pct. The increase was mainly due to a 5.8pct month-on-month increase in R&D expenses. Credit/asset impairment of $51/180 million in 23 years, mainly accounts receivable and inventory accruals. 23Q4/24Q1 operating cash flow of -2.7/-1.67 billion yuan continued to be under pressure.
Profit forecast and investment rating: Based on Haifeng falling short of expectations and increased competition in the fan industry, we downgraded the company's profit forecast for 2024-2025. We expect net profit of 24.4/30.3/3.33 billion yuan in 2024-2026 (the value was 50.8/6.06 billion yuan before 24/25), +556%/+24%/+10% over the same period, corresponding to PE 9x/7x/7x, considering the company's leading fan status and optimized profit for Sea Wind shipping repair to maintain the “buy” rating.
Risk warning: Industry demand and company shipments fall short of expectations, increased competition, etc.