Key points of investment:
XinQianglian discloses its 2023 Annual Report. In 2023, the company achieved operating income of 2,824 billion yuan, a year-on-year increase of 6.41%; net profit to mother of 375 million yuan, an increase of 18.58%; deducted non-net profit of 300 million yuan, a year-on-year decrease of 7.43%.
Xinqianglian revealed its 2024 quarterly report. In the first quarter of 2024, the company achieved total revenue of 447 million yuan, a year-on-year decrease of 11.76%; net profit loss to mother of 51.7726 million yuan, profit of 443.306 million yuan for the same period last year; deducted non-net profit of 24.1470 million yuan, a year-on-year decrease of 59.72%.
Wind power bearings grew steadily in 2023, and other businesses grew rapidly in 2023, achieving operating income of 2,824 million yuan, up 6.41% year on year; net profit to mother of 375 million yuan, up 18.58% year on year; after deducting non-net profit of 300 million yuan, down 7.43% year on year.
By business: The slewing bearing business achieved revenue of 2.263 billion yuan, up 5.78% year on year, accounting for 80.13% of revenue; locking plate business achieved revenue of 335 million yuan, up 24.8% year on year, accounting for 11.87% of revenue.
By industry, wind power product revenue was 2.05 billion yuan, up 0.76% year on year, accounting for 71% of revenue; locking plate business achieved revenue of 335 million, up 24.8% year on year, accounting for 11.87% of revenue; offshore equipment business achieved revenue of 172 million, up 93.32% year on year; and shield engine business revenue of 73 million, up 42.27% year on year.
In 2023, the company sold 23,110 slewing bearing products, up 20.01% year on year, with an average price of 99,900 pieces, down 11.86% year on year; wind power locking plates sold 9116 pieces, up 16.41% year on year, with an average price of 36,800 per piece, up 7.21% year on year; sold 194969.27 tons of forged products, up 35% year on year.
The gross margin of slewing bearings declined slightly
In 2023, the company's gross margin was 26.66%, down 0.84 percentage points year on year; net interest rate was 13.93%, up 1.54 percentage points year on year; after deducting non-net interest rate of 10.61%, down 1.58 percentage points year on year.
The main reasons are: 1) the gross margin of the wind power bearing business decreased by 1.65 percentage points in 2023; 2) non-recurring profit and loss increased in 2023, and other income and income from changes in fair value increased by 64.13 million, which led to an increase in net interest rates. By business: The gross profit margin of slewing support in 2023 was 27.87%, down 1.65 percentage points from the previous year; the gross profit margin on the locked market was 22.46%, up 3.19 percentage points from the previous year.
Seasonal factors and fair value changes in the industry put pressure on the 2024Q1 performance to achieve total operating income of 447 million yuan in the first quarter of 2024, a year-on-year decrease of 11.76%; net profit loss to mother of 51.7726 million yuan, profit of 443.306 million yuan in the same period of the previous year; deducted non-net profit of 24.1470 million yuan, a year-on-year decrease of 59.72%.
Q1 revenue and net profit returned to mother in 2024 were under pressure, mainly due to factors such as changes in fair value, seasonal industry factors, and product restructuring. In Q1 of 2024, transactional financial assets and other illiquid financial assets caused large fair value changes losses, amounting to RMB 91.09 million.
The 2024Q1 gross profit margin was 19.24%, after deducting the non-net profit margin of 5.41%, which was a significant decrease compared to the 2023 annual report.
Wind power bearings are the leading domestic producers, benefiting from improving wind power demand in the medium to long term. Wind power bearings are one of the products with high technical content and low localization rate of wind power equipment components. As wind power tender prices continue to decline, the localization rate of yaw propeller bearings has reached a high level, and the localization rate of yaw propeller bearings has reached a high level. Localization of more technically difficult spindle bearings and gearbox bearings is still low, and there is clear room for improvement.
The company has been rooted in slewing bearings for many years and has always been the industry leader in the field of localization of wind power bearings. Some of the company's products have been replaced by domestic production, and important progress has been made in high-power fan bearing product technology. The 1.5-18MW variable pitch and yaw bearings and high-power wind power yaw propeller bearings developed by the company were imported; 2-5MW three-row cylindrical roller spindle bearings, 3-18MW single-row tapered roller bearings were mass-produced, and 3-12MW non-soft belt double row tapered roller spindle bearings were mass-produced. Among them, 12MW offshore typhoon resistant spindle bearings have overcome technical problems and successfully installed; the 5-7MW self-aligning roller bearings developed and produced by the company have been successfully installed; the 5-7MW self-aligning roller bearings developed and produced by the company have been successfully installed. Complete verification and batch installation. At this stage, the company is developing supporting bearings for fans of 20MW or more and developing prototypes to prepare advance layouts to cope with the advent of the era of large-scale fans.
As an important part of clean energy, wind power has always received great attention in our country. In 2023, China added 75.9 GW of installed wind power, double the previous year; the cumulative installed capacity of wind power was 440 GW, an increase of 20.7% over the previous year. In 2023, the open market tender capacity for wind power projects exceeded 123.2 GW, an increase of about 10% over the previous year, and reached a new high on the basis of last year's high base. Massive tenders from 2022 to 2023 guarantee the rapid growth of wind power installed capacity in the next few years, and the wind power bearing business demand is strongly supported.
Profit forecasting and valuation
The company is a leading domestic wind power bearing enterprise. Benefiting from strong demand for wind power installations, the future market space is large. At the same time, the company's spindle bearing and gearbox bearing business is being localized and replaced, and the business is poised to go forward.
We forecast that the company's revenue for 2024 to 2026 will be 3.266 billion, 3.745 billion, and 4.213 billion, respectively, and net profit to mother will be 414 million, 488 million, and 552 million, respectively. The corresponding PE is 18.31X, 15.54X, and 13.74X, respectively. Maintain the company's “buy” rating.
Risk warning: 1: demand for installed wind power falls short of expectations; 2: the impact of changes in wind power technology paths on bearing demand; 3: increased market competition and declining gross margin; 4: rising raw material prices.