Description of the event

The company achieved operating income of 20.2 billion yuan in the first three quarters of 2024, a year-on-year decrease of 4%, and realized net profit attributable to shareholders of the parent company of 0.8 billion yuan, a year-on-year decrease of 35%. Among them, the company achieved operating income of 8.4 billion yuan in 2024Q3, a year-on-year decrease of 19%, and realized net profit attributable to shareholders of the parent company of about 0.15 billion yuan, a year-on-year decrease of 75%.

Incident comments

On the revenue side, the company's 2024Q1-Q3 revenue declined slightly year on year. Judging from fan shipments, the company shipped 7.70 GW of 2024Q1-Q3 fans, up 11% year on year; among them, 2024Q1-Q3 shipped 6.35 GW of land wind fans, which increased faster year on year, while 2024Q1-Q3 shipped 1.35 GW of sea wind fans, a decrease of about 32% year on year. As a result, the revenue side decline is expected to be partly due to shipping restructuring, and the delivery price of land wind fans is expected to drop year over year. At the same time, the Q3 company expects shipments of about 3.7 GW, a month-on-month increase. Among them, Sea Wind shipments are about 0.8 GW, which is a significant increase compared to the first half of the year, so the 2024Q3 revenue increase is expected to mainly benefit from the increase in fan deliveries.

On the profit side, the company's gross margin in 2024Q3 was about 10.3%, of which the gross profit margin of the fan and accessories sales business was 8.01%, a slight increase compared to the first half of the year; at the same time, the gross margin of the company's 2024Q3 fan manufacturing business reached 7.9%, an increase of more than 1 pct over the previous month.

The company's gross margin of fan manufacturing has been increasing quarterly for 4 consecutive quarters since 2023Q4. We believe it has benefited from improvements in the company's product structure and continued internal cost reduction in the fan business. Considering that the current tender price of land wind fans is expected to bottom out and stabilize, we think the gross margin of the company's fan manufacturing business is expected to increase further in the future? In terms of cost rates, the company's expense ratio for the 2024Q3 period was about 14.9%, an increase of 0.9 pct over the previous year; among them, the company's 2024Q3 sales expense ratio reached 8.2%, an increase year-on-year and month-on-month. We expect it to be related to the transfer of the company's power plants and the continued expansion of overseas business. At the same time, the company received an investment income of 0.63 billion yuan. It is expected that the company mainly carried out actions such as power plant transfers in Q3. In the end, the company achieved a net sales margin of 2.2% in 2024Q3.

In addition, the company's inventory balance at the end of 2024Q3 was about 11 billion yuan, a slight increase over the previous month; the company's contract debt balance at the end of 2024Q3 was about 8.5 billion yuan, which increased both month-on-month and year-on-year. At the order level, 2024Q1-Q3 added 16.98 GW of orders, and the current execution capacity reached 34.12 GW.

Looking ahead, the tender price of Landwind is expected to gradually stabilize. Combined with the installed volume of domestic wind power in 2025, the company is expected to achieve a sharp rise in volume profit. At the same time, the company is actively exploring the overseas fan market, which is expected to lay the foundation for subsequent overseas delivery boom and further unleash the flexibility of performance growth. The company's net profit for 2024 and 2025 is estimated to be about 1.3 billion yuan and 2.7 billion yuan, corresponding to PE 23 or 11 times. Maintain a “buy” rating.

Risk warning

1. Wind power installation falls short of expectations;

2. Increased competition has led to profitability falling short of expectations.