FY2023 and 1Q24 results are largely in line with market expectations

The company announced FY2023 and 1Q24 results: the company's revenue in 2023 was 27.86 billion yuan, -9.4% year on year; net profit to mother was 372 million yuan, -89.2% year on year, which is the lower limit of the previous performance forecast.

1Q24's revenue was 5,075 billion yuan, +86.6% year over year; net profit to mother was 304 million yuan, turning losses into profits year over year and month over month. The company's FY2023 and 1Q24 results are basically in line with market expectations. The sharp year-on-year decline in 2023 results was mainly due to the company's fan business being affected by competition and losses in this business due to temporary replacement of sea wind models, as well as the impact of low power plant transfers and significant impairment.

Fan profits were under pressure in 2023, and power plant sales fell far short of previous targets. Due to the continuous impact of competitive pressure on industry prices since Land Wind Parity, the company's profitability continued to be under pressure since 2H22, and profitability continued to decline in 2023. In 2023, the company achieved about 2.4 GW of sea wind fans shipments, clearly leading its peers, but due to the temporary replacement of some project models, the company also reduced the profit margin of sea wind products. In the end, the company's gross margin of fans in 2023 was only 6.0%, down 12.0ppt from the previous year.

In 2023, the company achieved the transfer of 791 MW of power plants, which fell far short of the previous target and failed to contribute sufficient profit support. In addition, the company accrued various impairment losses of 693 million yuan in 2023, mainly due to bad debt losses on accounts receivable, and a small amount due to falling inventory prices, which also significantly reduced performance.

Development trends

Fan profit margins are expected to pick up, power plant sales are expected to return to normal, and offshore and overseas are long-term dominant directions. In 2024, we anticipate that the company's fan gross margin is expected to show an upward trend, mainly due to: 1) the cost reduction of upstream components; 2) the company's landwind is actively switching to a low-cost double feed route; and 3) the profit of sea wind fans is expected to return to normal. At the same time, the company's power plant sales business is expected to gradually complete normal delivery this year due to delays in some approval processes. The company continues to actively deploy offshore and overseas markets. We believe that the company is expected to maintain a leading market share in the small domestic offshore wind power supply cycle 2024-2025 and the larger development stage. Overseas market companies are also expected to gradually place more orders with a continuous layout, and are expected to achieve a large number of shipments over the next 3-4 years.

Profit forecasting and valuation

We maintain the company's profit forecast for 2024-2025 unchanged. The company's current stock price corresponds to 8.6 and 7.1 times price-earnings ratios in 2024 and 2025. We are optimistic about the company's upward trend in fan profits in 2024. We are optimistic about the company's competitiveness in the offshore and overseas markets in the medium to long term, and keep the company outperforming the industry rating and target price of 11.8 yuan unchanged, corresponding to 10.0 and 8.2 times price-earnings ratios in 2024 and 2025, with 16.1% upside compared to the current stock price.

risks

Increased competition in the industry puts pressure on the company's fan shipments and profit margins; industry demand falls short of expectations; depreciation pressure continues.