occurrences

The company's 2023 annual report: The company's revenue in 2023 was 1,685 billion yuan, up 3.22% year on year; net profit loss to mother was 88 million yuan, down 143.0% year on year.

The company's 2024 quarterly report: 2024Q1's revenue was 124 million yuan, down 75.22%/5.04% year on year, respectively; it returned 74 million yuan, down 10.28% year on year, turning loss into profit from month to month.

Affected by multiple factors, the company's short-term performance is suppressed

The company's performance losses in 2023 are mainly due to: 1) The decline in product prices due to sea breeze parity and the phased lack of market demand after the “rush to buy”. In 2023, the company's pile/tower revenue was 1,105 to 394 million yuan, up -11.53%/16.78% year on year, and gross profit margin was 10.32%/3.52%, down 3.25/7.11 pct year on year, respectively. In 2023, the company achieved sales of 129 million yuan and a gross profit margin of -5.49%. 2) The wind farm in which the company participated was relatively small; 3) Depreciation and amortization increased after the completion and transformation of the company's new base; 4) Due to the impact of the settlement progress of completed projects during the “rush to install” period, accounts receivable and contract assets became longer. According to the corresponding accounting policies, the company accrued a cumulative impairment of 184 million yuan in 2023. In 2023, the company's gross margin/ net margin was 9.77%/-5.13% respectively, down 4.98/18.12pct year-on-year, putting pressure on profitability.

Domestic maritime landscape is picking up, and construction is expected to accelerate

The short-term pace of development of the domestic sea breeze industry has slowed down. Based on the “14th Five-Year Plan” sea breeze plan for coastal provinces and cities in China, there is still more than 30 GW of grid-connected installation demand. 2024-2025 is a critical time point in the latter half of the “14th Five-Year Plan”, and seabreeze construction is expected to accelerate.

The seabreeze production base was laid out ahead of schedule, and production capacity continued to expand

By the end of 2023, the company had multiple production bases such as Haili Offshore, Haili Equipment, and Haiheng Equipment.

In addition, Haili Wind Energy Base, Shandong Dongying Base, and Weihai Rushan Base are expected to be put into operation in 2024. The first phase of the Jiangsu Qidong Plant is expected to be put into operation in 2024. The Jiangsu Binhai base, Zhejiang Wenzhou base, and Guangdong Zhanjiang base are under planning and construction. The company actively lays out production bases ahead of schedule and continues to expand sea breeze production capacity. It is expected that in the future, priority will be given to benefiting from the recovery in the sea landscape.

Investment advice and profit forecasting

We expect the company's net profit to be 515/730/959 million yuan in 2024-2026, up 685%/42%/31%, respectively. The current stock price corresponding to PE is 20.5/14.5/11.0 times, respectively, maintaining the “Overweight” rating.

Risk warning

Risk of changes in industry policies, risk of large fluctuations in raw material prices, increased risk of market competition, risk of Sea Breeze installation falling short of expectations, risk of project contract extension, and risk of base investment and construction progress falling short of expectations.