Incident: Sun Moon Co., Ltd. released its 2024 three-quarter report.

First three quarters of 2024:

1) Achieved revenue of 3.185 billion yuan, -9.78% year over year; realized net profit of 0.507 billion yuan, +43.54% year over year; realized net profit without deduction of 0.223 billion yuan, -28.17% year over year.

2) Achieved gross profit margin of 17.22%, -2.27pct year on year; net profit margin 15.76%, +5.81 pct year on year.

3) The cost rate for the period was 8.06%, +0.2pct year on year, and the sales/management/R&D/finance expense ratios were 0.39%, 4.16%, 4.93%, and -1.43%, respectively, with year-on-year changes of -0.37, +0.04, -0.41, and +0.94pct, respectively.

2024Q3 single quarter:

1) Achieved revenue of 1.397 billion yuan, +23.23% year over month, +28.11% month on month; realized net profit of 0.085 billion yuan, +37.98% year on year, -74.61% month on month; realized net profit without return to mother 0.07 billion yuan, +32.31% year on year, -14.39% month on month.

2) Achieved gross profit margin of 14.77%, year-on-year -0.32pct, and -2.69pct month-on-month; net profit margin of 5.76%, +0.42pct year-on-year, and -25.03pct month-on-month.

3) The cost rate for the period was 8.16%, -1.2pct year on year, and the sales/management/R&D/finance expense ratios were 0.29%, 3.79%, 5.08%, and -1.00%, respectively, with year-on-year changes of -0.42, -1.06, -0.56, and +0.85pct, respectively.

Wind power tenders are increasing, and 2025 is expected to see a high increase in installed capacity. According to Goldwind Technology data, as of September 30, 2024, the domestic public tender market added 119.1GW of new tenders, an increase of 93.0% over the same period last year, and wind power tenders exceeded expectations.

In 2024, Landwind entered the era of intensive delivery of large MW models, and production capacity for large MW parts was scarce. According to Fengmang Energy statistics, since November 2023, tenders for 10MW fans have started rapidly. The wind power industry has used 10MW or more wind turbines for about 16.7 GW projects; according to the wind power industry, it takes about 1 year from tender to start construction, so the above projects will enter the delivery period one after another in the second half of 2024, and the delivery period is usually concentrated. It is expected that the 3.91 GW 10MW+ fan delivery time will be mainly from March 2024 to August 2025; the 8.29GW 10+ EPMWC project The period from commencement of construction to delivery is concentrated from March 2024 to June 2025. The big MW model is progressing rapidly. In April 2023, the top 5 domestic machine builders have just completed the “troop deployment” in the 10MW+ field. From model iteration to project delivery, the actual supply chain does not have enough time to adjust large megawatt production capacity, so it is expected that upstream large-scale casting capacity may be scarce, and the company, as a leading casting company, is expected to fully benefit from the high demand in the industry and the shortage of production capacity.

The company is speeding up the construction of an “integrated delivery” industrial chain, which is expected to obtain profits in the processing process. As of June 30, 2024, the company has developed a casting capacity of 0.7 million tons and a finishing capacity of 0.32 million tons. The company is vigorously promoting the construction of 0.22 million tons of large casting finishing capacity. At that time, it will form a finishing capacity of 0.54 million tons, which will basically fill the shortcomings in finishing, and while building an “integrated delivery” industrial chain, obtain profits from the processing process and enhance the competitiveness of the enterprise's product market.

Profit forecast: We expect to achieve net profit of 0.644/0.806/0.984 billion yuan from 2024 to 2026, corresponding to PE valuation of 20.9/16.7/13.7 times, maintaining the “increase” rating.

Risk warning: the risk of raw material prices rising or remaining high, production safety and environmental protection risks, and the risk of insufficient capacity utilization due to fluctuations in market demand.