The domestic wind power market share ranked first for 13 consecutive years. It ranked first in the global wind power market in 2023. It has maintained a leading position in the industry for many years, yet Goldwind Technology (02208), which has unlimited scenery, has carried the investor's heartache: performance is unstable, profits continue to decline, and market value has shrunk sharply.

The Zhitong Finance App learned that Goldwind Technology was one of the earliest enterprises in China to enter the field of wind power generation equipment manufacturing. After more than 20 years of development, it has long become No. 1 in the industry. However, in recent years, it has experienced development bottlenecks. Revenue stagnated, profits declined, and net profit declined by as much as 64% in 2021-2023. Affected by performance, the company's market value continued to fall, falling 82% from a high point during the cycle.

In fact, with the support of the “dual carbon” policy, the wind power industry still has long-term investment attributes. According to Energy Administration data, the installed capacity of wind power in 2023 was 440 million kilowatts, an increase of 20.7% over the previous year, maintaining a double-digit growth rate. Goldwind Technology, as a fan leader, is still the target that investors focus on. The company's valuation rebounded this year, but the fundamentals did not show a clear inflection point, and Q1 profits continued to be under pressure, falling 73% year over year.

Currently, the investment environment for Hong Kong stocks is getting better, the Hang Seng Index continues to rebound, and the profit effects of major sectors continue to be prominent. So can Goldwind Technology use the big market to reverse the valuation trend?

The wind power industry continues to grow

Performance is the basic basis for valuation. If Goldwind Technology wants both market capitalization and performance, Davis needs to reverse the downward trend in profits. From an industry perspective, the wind power industry is a clean energy industry. Through the development prospects of “double carbon” in the next few decades, wind power is in a stage of rapid development. According to the “14th Five-Year Plan”, more than 50 million kilowatts of installed capacity are added every year, which has also ushered in development opportunities for the wind power operation and maintenance market.

According to data from the Energy Administration, in 2023, China's wind power installed capacity was 440 million kilowatts, and its share of total energy installed capacity continued to rise to 15.1%. The compound growth rate in 2020-2023 was 16%, but the average annual increase of 39 million kilowatts of installed capacity was added, which is more than 22% lower than the planned target value. This is mainly due to factors such as unstable fans and wind abandonment. Furthermore, the removal of onshore wind power subsidies has dampened participants' enthusiasm, but after market rationality returns, the industry is expected to accelerate in the general direction of energy transformation.

It is worth mentioning that most provinces across the country have proposed promoting the use of wind power generation in the Carbon Peak implementation plan, and some provinces have put forward requirements for large-scale development of wind power installations. For example, Hebei Province's installed wind power and photovoltaic power generation capacity will reach 119 million kilowatts by 2027, and Sichuan Province requires the total installed capacity of hydropower, wind power, and solar power to reach more than 138 million kilowatts by 2025. Some agencies predict that the market size of China's wind power industry is expected to exceed 70 billion US dollars in 2027.

Wind power companies include enterprises that only make wind power and enterprises that have transformed into thermal power. In order to better seize policy outlets, actively increase the layout of the industrial chain, and control the supply chain and costs, this forces those that rely on fans as a source of revenue to also carry out industrial chain layout, such as Goldwind Technology, to continue to increase the layout of wind farms and wind power services. However, fan participants are fiercely competitive. Strong competitors to Goldwind Technology include Mingyang Intelligence, Envision Energy, and Yunda shares. Competition has led to “volume and price” instability. Under price competition, participants' profits continue to be compressed.

Fans drag down performance

Goldwind Technology is the leading fan company in the country, and is also most affected by the layout of the industrial chain and industry competition. In 2021-2023, wind power installed capacity grew by 17%, 12% and 19%, respectively, while the company's revenue growth rates were -9.62%, -8.85%, and 8.63%, respectively. In fact, the company's fan shipments have continued to grow, but the decline in shipping prices has led to a decline in performance, which deviates from industry trends, and this has also caused profit margins to continue to decline.

In 2023, the company's fan shipments were 13.8 GW, and the three-year compound growth rate was 13.62%. However, the compound growth rate of fan revenue was -9.2%. This was mainly due to the decline in fan shipping prices. The shipping prices of the company's fans from 2021 to 2023 are 374 yuan/MW, 235 yuan/MW, and 239 yuan/MW, respectively. Affected by shipping prices, the company lost fan profits year after year. The loss before tax was 620 million yuan in 2023, with a loss rate of 1.88%.

The fan business is not profitable, but the wind farm business “makes a lot of money”. Under the industrial chain layout, Goldwind Technology's power generation business made up for the loss of the fan business. In 2023, the company's revenue shares for fans, wind farms and wind power services were 65.56%, 21.72%, and 10.43% respectively. Among them, the wind farm development business performance was impressive. The revenue growth rate in 2023 reached 57.96%, and the three-year compound growth rate reached 43.14%.

The wind farm business is the company's most profitable business. In 2023, the profit before tax was 4.446 billion yuan, the profit margin was 40.73%, and the profit contribution was 176.43%. Looking at the past two years, the business contributed more than 100% to profits. As of 2023, the total installed equity capacity of the company's internal and external wind farms was 7.3 GW. Domestic and foreign wind power projects added 1.8 GW of grid-connected installed capacity, and 2.35 GW of capacity under construction, accounting for nearly 50% of the northwest region.

In addition, Goldwind Technology's wind power service business revenue is clearly volatile, and profits are also declining at an accelerated pace. In 2023, pre-tax profit was 317 million yuan, a year-on-year decline of 69.5%, with a profit margin of 6.05%. The wind farm power generation business has saved the bad fan and wind power service business. The company is also increasing investment in the wind farm business, and the asset scale continues to expand. By the end of 2023, wind farm assets were 76.548 billion yuan, which increased to 35.43%.

Obviously, the fan business is a breakthrough for the company to reverse the current situation. On the one hand, the business still occupies the core of revenue and has an immediate effect in improving profitability. On the other hand, the business accounts for more than 50% of assets, while the debt ratio is 66.4%, which is lower than 74.7% of wind farms. The increase in performance helps to greatly optimize finances. The “volume” of this business may have improved significantly in 2024. The external sales capacity of Q1 fans was 1436.34 MW, an increase of 29.4% over the previous year, but the “price” was still severe, leading to an increase in revenue, but profits continued to decline.

As of March 2024, the company's total number of external orders to be executed was 24.4.GW, of which 11 GW for 4MW (inclusive) -6MW units and 12.7 GW for 6MW and above units, accounting for 97.1% of the total. In addition, the company's external orders totaled 32.4 GW, of which the overseas order volume was 5.5 GW, and the total number of on-hand orders was 33.7 GW, an increase of 13.76% over the previous year. If the shipping price of the fan is stable, the increase in order volume can drive profit optimization through scale.

Fundamentals are expected to improve

In the long run, for Goldwind Technology, the fan business is mainly due to the advantages of the supply chain. The focus of development is the wind farm power generation business. The high profit margin and broad prospects of this business will be the key to whether valuations can return to a high level. The company's wind farm business has two main development directions, namely developing offshore wind power and developing overseas markets. Since this year, it has continued to increase investment in two major directions and expand the scale of assets in the wind power sector.

For example, in November of last year, the company announced that in order to seize the rapid growth opportunities of the domestic offshore wind power market, it will invest in the construction of a zero-carbon industrial base for wind power in Beibu Gulf. In May of this year, the company signed a Kalayaan 2 wind power project agreement with TBC, a leading renewable energy company in Southeast Asia, to officially enter the Philippine market and expand its business footprint to 6 continents and 40 countries.

In 2023, Goldwind Technology's overseas market revenue was 7.83 billion yuan, up 82.7% year on year, with a revenue share of 18.46%. Based on overseas orders, it is expected to maintain a high upward trend in 2024. Currently, the company's overseas layout accounts for only 7.57% of non-current assets, of which Australia and Argentina account for 1.5% and 5.53% of non-current assets, respectively. As more overseas projects are launched, overseas business will become an important growth curve for the company. In order to prevent exchange rate fluctuations from affecting overseas performance, the company announced in March this year that it will launch exchange rate and interest rate hedging services.

It is worth noting that the company actively rewards shareholders and insists on paying dividends every year. This year, it announced a return plan for the next three years (2024-2026). The cumulative profit distributed in cash in the last 3 years is not less than 30% of the average annual profit distribution achieved in the last 3 years, and mid-term dividends can also be paid according to the profit situation. According to Oriental Choice data, since 2010, the company has accumulated dividends 14 times, with a dividend ratio of 33.34%.

Overall, the decline in Goldwind Technology's performance is mainly affected by the fan business. Q1 fan shipments increased significantly in 2024, but shipping prices are still low, and profit improvements are limited. However, the leading fan advantage will better develop the wind farm business and global layout. The wind farm power generation business has become the company's key development business. Under high profit margins, an increase in revenue contribution will significantly improve the company's fundamentals.

In the short term, Goldwind Technology's valuation is still being suppressed by profits from the fan business, but in the long run, under the “dual carbon” policy, the wind power industry is still one of the long-term investment sectors, and the company's global wind power layout unleashes cost advantages. Profits are expected to improve. At the same time, its dividends are steady, and long-term valuations are expected to return.