Key points of investment
Incident: The company released the 2023 annual report and the 2024 quarterly report. Net profit for the full year of 2023 was 1,685 million yuan, net profit to mother -143.00%; net profit after deducting non-return to mother was 117 million yuan, -340.14% year on year; 24Q1 achieved revenue of 124 million yuan, -75.22% year on year, net profit of 74 million yuan, net profit to mother of 74 million yuan, year-on-year.
Profits were under pressure in '23, and improved month-on-month in 24Q1. In 2023, the company's net profit to mother was -88 million yuan, -143.00% year on year; gross profit margin was 9.77%, -4.98pct year on year. Among them, the gross profit margin of piles was 10.32%, the year-on-year -3.26pct, and the gross profit margin of wind power towers was 3.52%, and -7.11pct year-on-year. The 24Q1 quarter achieved revenue of 124 million yuan, -75.22% year-on-year, and net profit to mother of 74 million yuan, or -10.28% year-on-year. The decline in profitability is mainly due to the drop in product prices brought about by ocean wind parity and phased lack of market demand after the “rush wave”. Coupled with the small amount of online power generation in the wind farms the company participated in, and the increase in depreciation and amortization after the construction and renovation of the new base. At the same time, a total of 184 million yuan of impairment was accrued throughout the year, further hampering performance. 24Q1 The company's performance improved month-on-month. The company recovered some of its long-standing accounts receivable and was preparing to return the corresponding bad debts; by the end of the first quarter, the contract debt was 157 million, an increase of 117% over the end of '23, reflecting a recovery in the downstream economy. As the progress of the Sea Breeze project accelerates, the increase in the company's revenue scale is expected to dilute costs, and profitability can be expected to be repaired.
Offshore venture capital construction is expected to accelerate, and production capacity expansion is progressing smoothly. Based on the “14th Five-Year Plan” offshore wind power development plan, the total capacity of offshore wind power connected to the grid in each province is close to 60 GW. Up to now, demand for more than 30 GW of grid-connected installations has not been released. It is expected that large-scale construction will be ushered in 2024-2025, and demand certainty is high. According to wind power bidding data, judging from the pace of project construction, about 11-12 GW of projects that have already started construction or have been tendered are expected to be connected to the grid in 2024, which is expected to lay the foundation for the seaside installation boom in 2024. The company has multiple production bases such as Haili Offshore, Haili Equipment, and Haiheng Equipment; Haili Wind Energy Base, Shandong Dongying Base, and Weihai Rushan Base have completed infrastructure construction at the end of 2023 and are expected to be put into production in 2024; at the same time, the first phase of the Jiangsu Qidong base is also expected to be put into operation in 2024. During the reporting period, the company carried out base project layouts in Zhanjiang, Guangdong and Wenzhou, Zhejiang, respectively. Wenzhou and Zhanjiang have unique location advantages and sea breeze resource advantages, which are expected to lay a solid foundation for future business growth; the Zhanjiang base is also an important support for the company to enter overseas markets in the future. The company's performance is expected to recover as the sea breeze industry recovers and production capacity is being implemented one after another.
The overall cost rate stabilized during the period, and R&D investment increased. The company's sales, management, R&D and financial expenses rates in '23 were 0.57%/4.97%/1.48%/-0.41%, respectively, -0.04/+1.28/+0.66/+1.41pct. The company attaches importance to technological innovation and invested 120 million yuan in R&D in 23 years, +19.56% over the same period last year. During the reporting period, we actively participated in research and development of deep-water conduit frames, floating wind power and other technologies, continuously optimized the product structure, and increased market development efforts.
Investment advice: The company is a sea pile/tower faucet, has laid out production bases for marine wind equipment in many places, and has high-quality terminal resources. The company's performance is expected to pick up rapidly against the backdrop of improved seascapes. Considering the slowdown in the offshore wind power industry due to non-economic factors since 23, we have adjusted our profit forecast. The company's net profit for 2024-26 is 5.06, 7.17, and 914 million yuan (pre-forecast values for 2024-2025 were 9.37 billion yuan and 1,363 billion yuan), corresponding to EPS of 2.33, 3.30, and 4.20 yuan/share, maintaining a “buy” rating.
Risk warning: 1. Competition in the industry has intensified. 2. The installed capacity of wind power is lower than expected. 3. The pace of production capacity investment is lower than expected.