Key points of investment

Operating income has grown steadily, and gross margin has improved significantly

With 2024H1, the company achieved operating income of 11.796 billion yuan, up 10.85% year on year; net profit of 0.661 billion yuan, up 0.94% year on year; net profit after deducting non-return to mother of 0.556 billion yuan, up 3.40% year on year, gross profit margin of 18.72%, up 7.52 pct from 2023. With 2024Q2, the company achieved operating income of 6.721 billion yuan, a year-on-year decrease of 14.84%; net profit to mother of 0.356 billion yuan, a year-on-year decrease of 59.57%; net profit deducted of 0.265 billion yuan, a year-on-year decrease of 67.93%; and gross sales margin of 17.28%, a year-on-year decrease of 2.81 pcts, a year-on-year decrease of 3.34 pcts.

Fan sales increased 16% year on year, and the floating sea breeze platform broke through to 16.6MW2024H1. The company continued to promote the large-scale fan sales process, achieving 4.01 GW of fan sales, up 16.23% year on year, corresponding to achieving sales of fans and related accessories of 7.922 billion yuan, a year-on-year decrease of 16.16%. The estimated unit price of the fan was 1976 yuan/KW, down 27.87% year on year. It is estimated that the main reason is that the 2024H1 offshore wind power installation falls short of expectations, the company's share of high-cost sea-wind engines has decreased, and the share of low-cost landwind hosts has increased.

2024H1 added 9.73 GW of fan orders. For offshore fans, 2024H1 released the “OceanX Mingyang Tiancheng” floating wind power platform with the largest single capacity in the world, “OceanX Mingyang Tiancheng”, which has achieved a number of world firsts; the company's self-developed blade for the world's largest onshore unit with an impeller diameter of 230 meters has been discontinued.

Power plant operating revenue increased 17%, and wind farm sales are expected to increase revenue by 1.5 billion yuan 2024H1. The company achieved a total operating revenue of 0.975 billion yuan, an increase of 17.05% over the previous year. The company's operating new energy power plants have an installed capacity of 2.71 GW, and the new energy power plants in operation have achieved a total power generation capacity of 2.735 billion kilowatt-hours. 2024H1 plans to sell 100% of the shares of its wholly-owned subsidiaries Kailu County Mingyang Smart Energy Co., Ltd. and Naimanqi Mingyang Smart Energy Co., Ltd. to CGN to return 1.517 billion yuan in capital. The sale of the wind farm is expected to increase the company's profits.

Lu Feng's first public equity REITs were successfully approved, creating a two-wheel drive model for industry and capital, and the company continues to explore in depth the field of asset securitization of power plants. 2024H1 CITIC Construction Investment Mingyang Smart New Energy Closed Infrastructure Securities Investment Fund was officially approved for registration by the China Securities Regulatory Commission (Document No.: Securities Regulatory License (2024) No. 969). The project has become the country's first approved onshore wind power public REIT and the first private enterprise wind power public REIT. Issuing public infrastructure REITs is an important model for the “rolling development” of the company's new energy power plants. Through two-wheel drive of industry and capital, it is expected to enhance the company's asset operation model and business model.

Profit forecasting and valuation

The profit forecast was lowered and the “gain” rating was maintained. The company is a leading domestic offshore wind power plant and is steadily promoting the construction of new energy power plants. Considering that offshore wind power has fallen short of expectations, we lowered our profit forecast for 2024-2026. The company's net profit for 2024-2026 is 2.237, 2.893, and 3.143 billion yuan respectively (net profit to mother for 2024-2026 was 2.646, 3.211, and 3.725 billion yuan before the reduction), corresponding EPS was 0.98, 1.27, and 1.38 yuan/share, respectively. The corresponding PE is 9, 7, and 6 times, respectively.

Risk warning

Demand for wind power installations falls short of expectations; industry competition intensifies; raw material prices fluctuate; risk of product price fluctuations.