Incident: The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 4.235 billion yuan, an increase of 1.26%, and achieved net profit to mother of 251 million yuan, a gross profit margin of 20.11% and an increase of 1.28 pcts; 2024Q1 achieved revenue of 520 million yuan, an increase of 2.36%, to achieve net profit to mother of 43 million yuan, a decrease of 19.77%, and a gross profit margin of 24.03%, a decrease of 6.18 pct/month over month, an increase of 9.08 pcts.
Tower shipments grew steadily in '23, and gross margin increased year-on-year. In 2023, the company achieved sales volume of fan towers of about 512,600 tons, an increase of 19.70% over the previous year. In '23, the company strengthened cost control, improved the profitability of the manufacturing business, and achieved a gross profit margin of 12.09%, an increase of 1.55 pct over the previous year. By the end of '23, the company's total production capacity was about 913,500 tons, including 480,000 tons of sea breeze. At the same time, the company will carry out technical modifications and expansion of the Jiangsu Yancheng plant, which is expected to increase annual production capacity by 80,000 tons. As the share of high-margin sea wind products in shipments increases, the company's profitability is expected to further increase.
The scale of the new energy power generation business continues to expand. The company's new energy power generation projects are operating well. Among them, the Wuchuan 150MW wind power project was added to the grid in March 23, and the Baren 49.5MW wind power project was purchased in October 23. By the end of 23, the company had a total new energy power generation business scale of about 681.3 MW, 47.6 MW of projects under construction, and 50 MW of approved projects. Continued expansion of the wind farm business is expected to bring a steady increase in the company's performance.
Depreciation dragged down 23-year results, and 24Q1 operating cash flow was negative. The total depreciation of the company's accounts receivable, other accounts receivable and notes receivable in 2023 was $112 million. At the same time, the company settled production, with an output of about 621,500 tons in 23 years. Due to fluctuations in the pace of delivery by downstream customers, 171,900 tons of inventory were generated in a short period of time, resulting in inventory depreciation of $11 million, totaling 123 million yuan, which dragged down the 23-year results to a certain extent. 24Q1 increased its collection efforts, and product receipts increased dramatically, credit impairment surged back to $21 million, and achieved net operating cash flow of 164 million yuan, turning negative for the first time since 2021.
Lower the profit forecast and maintain the “increase in holdings” rating: Considering that the slow domestic sea breeze construction in 23 years affected the company's shipments to a certain extent, compounded by credit impairment, we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. The company's net profit to mother for 2024-2026 is 4.14, 5.44, and 626 million yuan, respectively (the original value for 24 and 25 was 615 million yuan and 870 million yuan). The corresponding EPS is 0.41, 0.53, and 0.61 yuan/share, respectively 13, 10, 8 times. The company is a leading wind power tower company, and the share of offshore production capacity continues to increase. Referring to the average valuation of comparable companies for 24 years, the company was given 15 x PE for 24 years, maintaining a “gain” rating.
Risk warning: The installed capacity of wind power falls short of expectations; the release of production capacity falls short of expectations; the construction of new energy power generation projects falls short of expectations.