Key points of investment:
Incident: The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved revenue of 1,685 million yuan, a net profit loss of 88 million yuan, a decrease of 143.00%, a gross profit margin of 9.77% and a decrease of 4.98pct; 2024Q1 achieved revenue of 124 million yuan, a decrease of 75.22%/5.04%, respectively, and achieved net profit to mother of 74 million yuan, a year-on-month decrease of 10.28% and a year-on-month decrease of 5.05% year-on-year 10.43pct
The progress of Haifeng construction in '23 fell short of expectations, compounded by impairment, and phased performance losses. The main reason for the loss in the company's performance in '23 was: (1) Due to the settlement schedule of completed projects during the “rush to buy” period, accounts receivable and contract assets grew longer. The company made impairment preparations for related assets, and accumulated depreciation of 184 million yuan throughout the year. (2) The company's new base has been completed and upgraded, and demand in the offshore wind power market is insufficient in stages. The company's capacity utilization rate is low, the unit cost is high, and the company's short-term profitability has been affected; (3) the wind farm in which the company participated in 23 years had a small online power generation capacity, which affected the return on investment.
Credit impairment losses recovered, wind farm investment returns improved, and 24Q1 reversed losses. The company turned a loss into a profit in the first quarter of '24:
As the progress of the domestic sea breeze project continued to advance, some of the company's long-standing accounts receivable began to be repaid, and 24Q1 was preparing to return the corresponding bad debts of 63 million yuan. At the same time, the wind speed of the wind farm in which the company participated was relatively good. Combined with the reduction in financial expenses issued by the subsidy, the 24Q1 company achieved an investment income of 55 million yuan, an increase of 240.97%/561.35%, respectively.
Offshore venture capital is ready to go, and the company is expected to be the first to benefit. The total grid-connected capacity of the “14th Five-Year Plan” offshore wind power plan in domestic coastal provinces and cities is close to 60 GW. Currently, there is still a gap of more than 30 GW. It is expected that large-scale construction will be carried out in 2024-2025. Judging from the pace of project construction, about 11-12 GW is expected to be connected to the grid in 2024, and China's offshore wind investment and construction is expected to accelerate. The company laid out production bases ahead of schedule, and infrastructure construction of the Shandong Dongying and Weihai Rushan bases was completed by the end of 2023; at the same time, the first phase of the Jiangsu Qidong base is also expected to be put into operation in 2024; in addition, the Jiangsu Binhai base, Zhejiang Wenzhou base, and the Guangdong Zhanjiang base are also being planned and built. As China's offshore wind investment and construction accelerates, the company is expected to take the lead in benefiting.
Adjust the profit forecast and maintain the “purchase” rating: China's offshore wind power construction in 2023 fell short of expectations, and the lack of phased demand affected the company's product release progress and product prices to a certain extent. Based on this, we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. The net profit to the mother for 2024-2026 is 6.05, 9.17, and 1,142 billion yuan, respectively (the original value for 24 and 25 was 8.47/1,613 billion yuan), corresponding to PE 17, 12, and 9 times, respectively.
The company is one of the few pure sea breezes business enterprises in China. Considering the long boom cycle where Sea Breeze is moving towards rapid growth, the company's growth is outstanding. Refer to the comparable company's average valuation level of 0.73 times PEG to maintain the company's “buy” rating.
Risk warning: Seabreeze's installed capacity falls short of expectations; the company's production capacity release falls short of expectations; wind farm investment returns fall short of expectations.