Key points of investment
The wind power market is fiercely competitive. Short-term profits are under pressure due to the off-season. In 2023, the company achieved operating income of 4.235 billion yuan, an increase of 1.26%; net profit to mother was 255 million yuan, an increase of 9.58% year on year; net profit after deducting non-return to mother was 255 million yuan, an increase of 22.68% year on year. With 2024Q1, the company achieved operating income of 520 million yuan, a year-on-year increase of 2.36%; net profit to mother was 43 million yuan, a year-on-year decrease of 19.77%; net profit after deducting non-return to mother was 41 million yuan, a year-on-year decrease of 15.90%. The main reason for the year-on-year decline in the company's performance was due to low shipments due to the off-season, which led to relatively high manufacturing costs.
The Yancheng plant lays out large-scale production capacity such as single piles and conduit frames, and the competitiveness of the industry is expected to continue to increase in 2023. The company's wind power equipment manufacturing business such as towers achieved operating revenue of 3,608 billion yuan, an increase of 0.33% over the previous year; the gross profit margin was 12.09%, an increase of 1.55 pcts over the previous year. The fan tower produced about 621,500 tons, and achieved sales of about 512,600 tons. With 2024Q1, the company achieved fan tower output of about 66,800 tons and achieved sales of about 49,900 tons. By the end of 2023, the company had 14 fan tower production bases across the country, with a total production capacity of about 913,500 tons. At the same time, the company will carry out technical modifications and expansion of the Yancheng plant in Jiangsu Province. After the construction of the project is completed, the annual production capacity will be increased by 80,000 tons. The main target products include marine products such as large single piles, towers, conduit racks, suction drums, and oil and gas pipe piles.
Continuing to expand the industrial chain, the new energy power generation business became a stable revenue source. In 2023, the company's new energy power generation business achieved operating revenue of 574 million yuan, an increase of 7.30% over the previous year; the average number of hours used for power generation was 2,212 hours, and the total sales volume was 1,466 billion kilowatt-hours, an increase of 34.24% over the previous year. Among them, wind power sold 1,293 billion kilowatt-hours, an increase of 42.08% over the previous year. The increase in wind power sales is mainly due to the good operation of the company's new energy power generation project. The Wuchuan 150MW wind power project was connected to the grid in March 2023, and the Balun 49.5MW wind power project was acquired in October 2023.
As of 2024Q1, the company held a total of about 681.3 MW of new energy power generation business, including about 118 MW of grid-connected photovoltaic power plants and 563.3 MW of grid-connected wind farms.
Profit forecasting and valuation
The profit forecast was lowered and a “gain in wealth” rating was given. The company is a domestic tower pile leader, and the operation of new energy power generation is progressing steadily. Considering the intense competition in the industry, we lowered our profit forecast for 2024-2025 and added a profit forecast for 2026. We expect the company's net profit to be 5.27, 6.45, and 734 million yuan respectively in 2024-2026 (net profit to mother of 70,000 yuan and 904 million yuan before the reduction), up 109.72%, 22.40%, and 13.69%, respectively. The corresponding EPS is 0.52, 0.63, 0.72 yuan/share, corresponding PE is 10, 8, and 7 times, respectively.
Risk warning
Demand for wind power installations falls short of expectations; raw material prices fluctuate; risk of product price fluctuations.