Matters:

The company released its 2024 semi-annual report, achieving revenue of 20.202 billion yuan, a year-on-year increase of 6.32%, net profit to mother of 1.387 billion yuan, an increase of 10.83% year-on-year, and net profit after deducting 1.373 billion yuan, an increase of 33.01% year-on-year.

With 2024Q2, the company achieved revenue of 13.223 billion yuan, a year-on-year decrease of 1.59%, and net profit to mother of 1.054 billion yuan, an increase of 6251.6% over the previous year.

Ping An's point of view:

The share of overseas revenue from the fan business increased, and gross margin continued to grow. In the first half of the year, the company's fan sales volume was 5.15 GW, down 10.9% year on year. The corresponding fan and parts sales revenue was 12.77 billion yuan, up 0.21% year on year. The increase in unit sales price may be mainly related to the increase in overseas fan sales share. It is estimated that the fan and parts business accounted for more than 30% of overseas revenue in the first half of the year, and overseas fan sales revenue doubled year on year. The gross profit margin of the fan and parts business in the first half of the year was 3.75%, up 6.29 percentage points from the previous year, continuing the growth trend since the second half of last year. We estimate that on the one hand, the increase in the share of overseas business with significantly higher gross margin levels boosted the overall gross margin level. On the other hand, the company's domestic fan business also achieved an increase in gross margin level through cost reduction. The profit situation of the company's fan business exceeded expectations, driving the company's performance in the first half of the year better than expected.

Driven by various factors, the gross margin of the fan business is expected to increase further in the future. As of the first half of the year, the company's external orders were 35.6 GW, up about 5.8 GW from the beginning of the year. It is estimated that the company added net new orders of about 11 GW in the first half of the year, an increase of nearly 50% over the previous year; as of the first half of the year, overseas orders were 5.17 GW, accounting for about 14.5% of orders. The domestic onshore fans delivered by the company in the first half of the year were still mainly GWHV12 platform series units. The GWH V17 is the company's next generation onshore fan model. The power level has been expanded from 8-10MW to 6-11MW, covering the low, medium and high wind speed markets. With the batch delivery of V17 platform products, the gross margin of the company's onshore fan business is expected to increase. The company has made a major breakthrough in obtaining orders for offshore fans. According to public bidding information, the scale of offshore fans won by the company since 2024 has reached 2.8 GW, ranking first in the country. The share of offshore fans in the company's fan shipping structure is expected to rise in the future. Overall, the company's leading position in the fan business is stable. With the increase in the share of Sea Wind and overseas shipments and the iterative upgrading of Land Wind products, there is still room for further improvement in the gross margin of the fan business.

The pace of connecting wind farms to the grid has accelerated, and the gross margin of wind power services has increased dramatically. In the first half of the year, the company's domestic and foreign self-operated wind farms added 1078.67 MW of installed equity capacity, an increase of 84.3% over the previous year, achieving the goal of more than 1 million kilowatts of equity grid-connected capacity in the first half of the year; the transfer of equity grid-connected capacity was 225 MW, a year-on-year decrease of about 70%. As of the first half of the year, the cumulative equity grid installed capacity was 8143.06 MW, and the equity under construction was 3689.21 MW. In the first half of the year, the company's wind power project achieved power generation revenue of 3.472 billion yuan, an increase of 3.72% over the previous year; investment income from the transfer of shares in the wind farm project was 0.105 billion yuan. In the first half of the year, the company achieved wind power service revenue of 2.374 billion yuan, with a year-on-year increase of 2.59%, including post-service revenue of 1.602 billion yuan, an increase of 32.84% over the previous year. Due to the increase in the share of high-value-added post-service business revenue, the gross margin of the company's wind power service business increased sharply by 9.62 percentage points to 24.77% in the first half of the year. As of the first half of the year, the company's domestic and foreign after-sales service business project capacity was close to 33.55 GW, an increase of 13% over the previous year. As the after-sales service capacity continues to grow, the performance contribution of wind power services is expected to continue to grow.

Investment advice. Considering that the gross margin of the fan business is better than expected, the company's profit forecast is estimated to be 2.909, 3.512, 4.473 billion yuan (original forecast values 2.511, 3.362, 4.211 billion yuan) for 2024-2026, corresponding to dynamic PE 10.7, 8.9, and 7.0 times. The company's fan scale advantage is obvious, and the wind farm and other businesses are developing. In the future, it is expected that various measures will reduce costs to enhance the competitiveness of the fan business and maintain the company's “recommended” rating.

Risk warning. (1) Domestic and foreign wind power demand falls short of expectations. (2) The risk of increased protection of overseas trade. (3) Risk of further intensification of competition in the fan industry and lower profit levels than expected.