The scenery is doubly powerful, and the diversified production capacity layout opens up room for growth. Zhenjiang Co., Ltd. is a leading domestic enterprise specializing in steel structural parts for renewable energy power generation equipment, mainly covering the field of steel structural parts for wind power and photovoltaic equipment; the company is deeply involved in domestic and overseas markets and has rich customer channels. It is a component supplier for internationally renowned companies such as Siemens Gamesa, ENERCON, Vestas, Shanghai Electric, TBEA, Sunshine Power, GCS, etc., and has developed new high-quality customers such as Ideematec in 2023. The company has implemented equal emphasis on domestic and international layouts, and is advancing in both sectors of scenery, and various projects are progressing steadily. It is expected that production capacity and utilization rates will be effectively increased, and delivery is guaranteed at eight major factories. In 2023, the company achieved a double increase in revenue and net profit to mother. Among them, operating income reached the highest growth rate in nearly 4 years; net profit to mother increased significantly, up 93.57% year on year; benefiting from the high gross profit margin of overseas business, the company's profitability recovered, and gross margin increased by about 6.37 pcts year on year.
Wind power: Continuing to advance the “two seas” strategy, large megawatts of ocean wind have been delivered in small quantities. The company's main products in the wind power business include wind power equipment such as stators and towers, as well as offshore wind power installation, operation, maintenance, assembly and leasing services. The company has had stable cooperation with the internationally renowned fan company Siemens Gamesa since 2012. It has a solid fan parts manufacturing base and rich customer channels, and has a certain market influence. Benefiting from countries' policy promotion and abundant offshore wind power resources that need to be developed urgently, overseas ocean winds have a lot of room for future growth; under the large-scale trend, the company announced the Jiangyin Phase IV and Nantong factory projects in 2023 to increase the production capacity of large megawatt fans for offshore wind power, and provide large megawatt fan components for Siemens Gamesa. It is expected that the company's fan business will have strong growth capacity.
Photovoltaics: Tracking brackets are in high demand in the North American market, and we are working with downstream manufacturers to lay out production capacity. The company is a qualified supplier to head bracket manufacturers such as GCS, Nextracker, ATI, etc., and built a factory in the US with the help of the IRA Act, and the US factory was able to ship in small quantities in 2023. Benefiting from the high boom in the overseas PV tracking bracket market, especially the US market, under the general trend of global energy transformation, the company's photovoltaic bracket business may grow rapidly. Meanwhile, the company and GCS are jointly building a tracking bracket factory in Saudi Arabia. It is expected to be put into operation in the second half of 2024, which may increase the company's PV business performance in 2025.
Investment advice: As a leading company in steel structural components, the company is developing wind power and photovoltaics together, and they all cooperate deeply with leading companies in the industry. The revenue and profit of the wind power business will both benefit from the increase in demand for large megawatt fans; the photovoltaic business will benefit from the high prosperity of the overseas industry and market expansion of downstream customers. We expect the company's revenue in 2024-2026 to be 50.85/66.01/8.068 billion yuan, up 32.36%/29.82%/22.22% year on year; net profit from the mother is 3.10/4.16/531 million yuan, up 68.58%/34.42%/27.54%, EPS 2.18/2.93, respectively /3.74 yuan/share, corresponding to the current stock price (closing price on June 21, 2024), PE is 15X/11X/9X respectively, maintaining a “buy” rating.
Risk warning: risk of fluctuations in raw material prices; risk of macroeconomic environment changes and market fluctuations; risk of major customer operations falling short of expectations; risk of exchange rate fluctuations and foreign exchange policy changes; risk of capacity expansion projects not being completed as planned