Brief performance review

On August 29, 2024, the company disclosed its semi-annual report. In the first half of the year, revenue was 0.713 billion yuan, a year-on-year decrease of 10.6%; net profit to mother was 0.074 billion yuan, a year-on-year decrease of 63.1%.

Among them, Q2 achieved revenue of 0.458 billion yuan, a year-on-year increase of 26.8%; net profit to mother was 0.045 billion yuan, a year-on-year decrease of 55.4%.

Management analysis

Due to continued competition in machine prices, wind power spindle performance was under pressure: in the first half of the year, the company's wind power spindle achieved sales revenue of 0.449 billion yuan, a year-on-year decrease of 32.4%, achieving a gross profit margin of 22.5% and a year-on-year decrease of 13.2 pcts. The company's forged spindle products cover a full range of 1.5MW to 9.5MW models, achieving full power coverage of forging models. Benefiting from the industry's volume in the second quarter, revenue in the forging spindle field doubled.

The business structure was gradually optimized, and the industrial casting and forging business bucked the trend: the company actively expanded its casting and forging business horizontally and made great progress. In the first half of the year, other precision shaft products achieved sales revenue of 0.163 billion yuan, an increase of 40.1% year on year, gross margin was 31.2%, down 5.6 pct year on year. In the first half of the year, the company developed more than 30 new domestic and foreign customers, covering shipbuilding, metallurgical equipment, energy and power industries, achieving contrarian growth in the industrial casting and forging business. The profitability of other precision shaft products is relatively good. As the company continues to increase its development efforts and increase its share of revenue, it is expected that the company's existing customer structure will be optimized and profitability improved.

The development of large megawatt wind power castings went smoothly, in line with the trend of large-scale downstream fans: Jinlei Heavy Equipment, a wholly-owned subsidiary of the company, won the bid for four major components of the Shanghai Electric Wind V7, Siemens Gamesa SG14 shaft system, Dongfang Electric 18MW shaft system and 20MW mainframe. Among them, Dongfang Electric's 18MW shaft system and 20MW orders have completed the delivery of some products, which is the first time in the industry that large megawatt wind power castings have been developed. As the large-scale expansion of downstream fans continues to advance, the company has taken the lead in breaking through the development and delivery of large megawatt castings, which is expected to strengthen cooperative relationships with leading downstream enterprises and form a differentiated competitive advantage.

Profit Forecasts, Valuations, and Ratings

According to the company's semi-annual report and our latest judgment on the industry, the 2024-2026 net profit forecast was adjusted to 0.47, 0.64, and 0.75 billion yuan, corresponding to PE of 11, 8, and 7 times, maintaining the “buy” rating.

Risk warning

Competition heightens risks; raw material prices have risen beyond expectations; new production capacity has fallen short of expectations; wind power installations have fallen short of expectations.